Vodafone Idea secures ₹2,000 crore loan from HDFC Bank, plans to clear remaining dues by December 2023

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Vodafone Idea secures ₹2,000 crore loan from HDFC Bank, plans to clear remaining dues by December 2023
Credit: © Reuters.

Vodafone (NASDAQ: VOD ) Idea (Vi), the financially struggling telecom company, has secured a loan of ₹2,000 crore from HDFC Bank. The funding has been used to settle past license fees (LF) dues and ₹1,700-crore spectrum usage charges (SUC), as confirmed by three insiders. The funds were disbursed over two years in mid-September, ahead of payment deadlines.

Main lenders such as State Bank of India (SBI) had demanded more promoter equity commitment, but HDFC Bank's loan stands as an exception. Telecom ministry officials have verified Vi's substantial LF and SUC payments, along with the second installment for last year's acquired 5G spectrum in the 3,300 MHz and 26 GHz bands.

In a letter to the telecom department, Vi committed to clearing the remaining dues by December 2023 and revealed ongoing talks with potential investors for equity funding. These discussions are expected to conclude within this quarter.

Vi's main financial issues stem from government dues rather than bank debt. The latter is expected to be fully repaid by next year. As per the telecom department's statement, it will not invoke bank guarantees if Vi sticks to its outlined payment plans.

InvestingPro Insights

InvestingPro's real-time data and insights provide a deeper understanding of Vodafone Idea's (Vi) financial position. With a market capitalization of $652.9 million and a P/E ratio of 37.2 as of Q4 2023, Vi's valuation implies a strong free cash flow yield, one of the InvestingPro Tips. However, the company has been facing challenges as its revenue growth has been slowing down recently. The company's operating income for the last twelve months as of Q4 2023 stood at $35.64 million, further underlining its financial struggles.

InvestingPro Tips also highlight that Vi is a prominent player in the Wireless Telecommunication Services industry, despite its short-term obligations exceeding its liquid assets. The company has seen a significant return over the last week, and its stock is trading near its 52-week high. However, analysts do not anticipate the company will be profitable this year, and it has not been profitable over the last twelve months.

InvestingPro offers additional tips for investors, providing a comprehensive view of a company's performance and prospects. For more detailed insights and tips, consider exploring InvestingPro's product offerings.

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