Vodafone Idea Dues Conversion Will Free Up Money to Pay Lenders

Vodafone Idea (Vi) ‘s decision to convert government dues into equity is beneficial for lenders as its liabilities will shrink and more money will be available to serve the huge pile of loans. However, clarity on the roadmap for the conversion is needed, senior executives at the bank said.

Its gross debt stood at Rs 1.93 trillion in September, of which deferred spectrum payment obligations were Rs 1.08 trillion, and bank and financial institution debt of Rs 22,700 crore, according to a presentation to investors.

A senior executive at a private bank said the money that would be used to pay government dues would stay on the books and would have to be used to pay off the loan.

As for granting additional funds, the bankers said some of the bank guarantees would be returned, freeing up space for additional exposure. Converting contributions into equity is only one element and banks will need to assess the plans. Vi has raised around 5,000 crore rupees through short-term loans from lenders including the State Bank of India and Union Bank of India.

A senior official at a public sector bank said it was mostly bridge financing to meet immediate debts.

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