Banks seek promoters’ skin in the game for Vodafone Idea funding | Company News

The caution among lenders comes at a time when the company is attempting to signal stability and renewed promoter engagement. Shares of Vodafone Idea rose more than 5 per cent on Wednesday after India’s third-biggest telecom operator announced a boardroom reshuffle, following a sharp reduction in its adjusted gross revenue (AGR) liabilities. The company named Kumar Mangalam Birla its new non-executive chairman, replacing Ravinder Takkar, who will move into the role of non-executive vice chairman, in a transition seen as significant for its ongoing capital-raising and network expansion plans. 

Public sector banks have also emphasised the need for participation across the banking system, including private lenders, and have asked Vi to widen its engagement to bring them on board. Discussions are being spearheaded by State Bank of India, though the country’s largest lender is reluctant to take on a disproportionate share of the exposure, sources said. 

Promoters currently hold a combined 25.64 per cent stake in the company, with Vodafone group Plc owning 19 per cent and the Aditya Birla group holding 6.63 per cent as of March 2026. The Government of India, meanwhile, owns around 49 per cent but is classified as a public shareholder rather than a promoter. 

According to a senior banker at a state-owned bank, discussions have been ongoing for a considerable period and have involved multiple lenders, but have yet to yield a conclusive outcome. Neither public nor private sector banks have committed to a specific quantum of funding. Banks have indicated that the company needs a mix of both and must work to secure broader participation.  

“What banks are looking for is comfort from the company. There are uncertainties around capex, Arpu (average revenue per user), AGR, and the company’s competitive position. If the company provides support to lenders in the form of guarantees from another group company or promoters, banks will be more willing to lend,” the banker said, adding that no such support is currently in place. “The company is in a difficult position, and ideally, promoters should stand behind it — either by committing additional funding if required or by providing support in case of default. That has been our ask so far, but there has been no response.”

Last week, the Department of Telecommunications reduced Vi’s outstanding AGR dues by 27 per cent to ₹64,046 crore, from ₹87,695 crore, following a reassessment. The dues, finalised by a committee constituted for this purpose, are now frozen as of December 31, 2025, with most of the amount payable in six instalments over six years beginning FY36, effectively providing a 10-year breather.

“Banks may well be driving a hard bargain with Vi if they’re seeking assurance of promoters putting in more equity. A higher rate of 25 to 50 basis points on a loan book of ₹25,000-35,000 crore would mean significant upside for lenders. Private sector banks are already under pressure, so they cannot entirely stay away from lending to Vi,” said a senior sector analyst, requesting anonymity.

Vi is seeking to raise funds to support a ₹45,000 crore capital expenditure programme over the next three years, aimed at expanding its network, improving profitability and retaining customers.

Vi’s Chief Executive Officer Abhijit Kishore said in January that both promoters, Vodafone Plc and the Aditya Birla group, remain committed to the business. The company is set to receive ₹5,836 crore from Vodafone Plc under a revised settlement of the contingent liability adjustment mechanism (CLAM) agreement signed during the 2017 merger of Vodafone India and Idea Cellular. Of this, ₹2,307 crore will be received in cash over the next 12 months, while the remainder will be realised through monetisation of 328 crore equity shares over the next five years. Kishore said the inflow would strengthen funding for capital expenditure and provide a liquidity buffer.

In addition, Vi raised ₹3,300 crore through non-convertible debentures in the quarter ended December 2025, while ratings agency ICRA upgraded the company to BBB+ with a positive outlook in March.

However, the company’s financial position continues to be weighed down by significant spectrum-related liabilities. Vodafone Idea is expected to pay around ₹49,000 crore over the next three years towards deferred spectrum dues, including ₹7,000 crore, ₹15,000 crore and ₹27,000 crore across the next three financial years. Kishore indicated that these payments would be managed through a combination of Ebitda (earnings before interest, taxes, depreciation, and amortization) expansion, operational efficiencies and bank funding.

Vi’s total debt currently stands at about ₹2.1 trillion, although losses narrowed in the December quarter. The company’s annual results are expected later this month.

The company did not respond to an email seeking comment.

“By virtue of being an Aditya Birla Group entity, Vi would benefit from the backing of the group, which itself requires banking resources as it expands into new sectors like paints and jewellery. Any bank would want the group as a client. With Kumar Mangalam Birla back as (non-executive) chairman, banks should derive some comfort around promoter backing,” said Vivekanand Subbaraman, research analyst at Ambit Capital, adding that the government, as the largest shareholder, also has a strong interest in preventing the sector from becoming a duopoly.

An executive at another large public sector bank said lenders are not particularly concerned about AGR dues in the near term. “In our calculations, we are not treating AGR as an immediate pressure point. While it exists, the 10-year horizon provides sufficient cushion,” the executive said.

Instead, lenders are more focused on spectrum-related issues. Although spectrum is a key asset, recent court rulings have made it non-chargeable for banks, limiting its usefulness as collateral. Over the next decade, spectrum dues and capital expenditure requirements are expected to remain central to lender concerns.

Analysts say the AGR relief improves near-term cash flows but significant challenges remain. Years of underinvestment, according to Axis Capital, have left the telecom operator trailing rivals such as Bharti Airtel and Reliance Jio, though the planned ₹45,000 crore capex over FY27-FY29 could help narrow the gap, subject to successful debt funding.

Bank of America noted that the AGR relief could facilitate a potential ₹25,000 crore debt raise along with a ₹10,000 crore equipment financing facility. Based on vendor interactions, it estimates that a capital infusion of $6-8 billion may ultimately be required to support meaningful 4G expansion and a competitive 5G rollout.

Spectrum dues repayment obligation vs expected Ebitda (₹ cr)