Vodafone Idea tumbles after Brickwork downgrades NCDs

Vodafone Idea tumbled 5.17% to Rs 7.34 after Brickwork Ratings downgraded its credit rating on the companys non-convertible debentures.

Dec 05, 2019 07:12 IST capital market

Credit rating agency Brickwork Rating downgraded its rating on Vodafone Ideas on non-convertible debentures (NCDs) to BWR BBB- from BWR A- (rating watch with negative implications).

The downgrade is on account of considerable impact of the adjusted gross revenue (AGR) related liability on the financial performance of the company resulting in huge losses, erosion of net worth and deterioration in the overall risk profile of the company. The announcement was made during trading hours today, 5 December 2019.

Last month, credit ratings agencies, CRISIL and CARE Ratings downgraded their ratings on Vodafone Ideas NCDs post the Supreme Court judgement. CRISIL downgraded ratings from BBB+ to BBB- while CARE Ratings downgraded to CARE BBB- from CARE A- with a negative implications outlook. Both the downgrades were on account of erosion in the overall risk profile of the company due unfavorable ruling of Supreme Court in AGR matter.

AGR is the basis on which Department of Telecommunications (DoT) calculates levies payable by operators. Telecom operators are liable to pay around 3-5% and 8% of the AGR as spectrum usage charges and licence fees, respectively, to DoT. Telcos argued that AGR should comprise revenue from telecom services, but DoT insisting that AGR should include all revenue earned by an operator, including that from non-core telecom operations.

Consequent to the SC judgement, Vodafone Idea accounted for the estimated liability of Rs 27,610 crore related to license fee and Rs 16,540 crore related to spectrum usage charges up to 30 September 2019, including the interest, penalty and interest thereon of Rs 33,010 crore.

Vodafone Idea has slumped 46.97% in last six months compared to a 9.09% rise in BSE Telecom index.

On consolidated basis, Vodafone Idea reported a net loss of Rs 50,921.9 crore in Q2 September 2019 as against a net loss of Rs 4973 crore in Q2 September 2018. The telecom operator reported a 41.8% rise in net sales to Rs 10840.20 crore on a YoY basis. Gross debt as of 30 September 2019 was Rs 1,17,300 crore, including deferred spectrum payment obligations due to the government of Rs 89,170 crore, but excluding lease liabilities.

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