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Vi’s failure to cement funding plan creates adverse effect on Indus Towers

The Q3FY23 results of Indus Towers have send alarm bells ringing after it became obvious that troubled times for Vodafone Idea (Vi) are set to continue for longer. Without naming the telco, the tower company in its financial results said that it had made provisions for a “doubtful debt allowance” of Rs 2,298 crore during the quarter ending December.

The contagion spreading from Vi could possibly have “an adverse effect on the business, results of operations and financial conditions” of the Indus Towers group, the company stated in its latest financial results.

The state of panic for the telecom tower company stems from Vi’s failure to cement a funding plan with its lenders. Vi had informed Indus Towers in the quarter ending June last year that it was in the process of finalising a funding plan with its lenders. Consequently, Vi had agreed to pay Indus Towers part of the monthly billing till December 2022. Vi had also agreed to pay all the dues outstanding till December 31, 2022, between January and June of this year.

However, the funding plan for Vi has not materialised. While Vi has partly paid off the dues till December 2022, it has told Indus Towers that it will encounter challenges in complying with the higher payment plan in the future.

The financial results don’t make for an optimistic read. Indus Towers informed investors that the group had a secondary pledge over Vi’s remaining shares held in the company, and a corporate guarantee has been provided by Vi, which could be triggered in certain situations and events. However, even these precautions “are not adequate to cover the total outstanding” of Vi, according to the company.

What’s worse, the tower company has taken an impairment of Rs 492.8 crore of its revenue equalisation asset up to September 30, 2022, which has been marked as an exceptional item in the company’s P&L statement. Further, the revenue amounting to Rs 66 crore for the December quarter has not been recognised as revenue from operations due to uncertainty of collections in future.

Indus Towers reported a consolidated net loss of Rs 708 crore for the quarter ending December. Its consolidated revenue for Q3FY22 was Rs 6,765 crore, down 2 percent Y-o-Y, while consolidated EBITDA was at Rs 1,186 crore, down 68 percent Y-o-Y.

Indus Towers gave a brief outline of its interactions with Vi, highlighting that the telco had informed that its ability to continue as a going concern is “dependent on its ability to raise additional funds as required, successful negotiations with lenders and vendors for continued support and generation of cash flow from operations to enable it to settle liabilities as they fall due.”

Vi also pointed out to Indus Towers that it had met all its debt obligations to date. Moneycontrol

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