IGI Logo

Liabilities coming up for payment soon

Vodafone Idea’s (VIL) Q4FY21 cash EBITDA at Rs22bn benefited from one-off gains in network cost of Rs4.5bn; adjusted cash EBITDA came in below our estimate despite cost-saving efforts. Though VIL has seen marginal improvement in 4G subscriber (sub) addition and lower total subs loss, it is too little to make any difference, in our view. We see liabilities coming up for payment soon and VIL may have cashflow mismatch.

The efforts to raise funds has also not yielded any outcome yet. Relief from government on spectrum payment, and reduction in AGR liability on SC accepting reconciliation are other hopes. We have cut our EBITDA estimates by 11%/14% for FY22E/FY23E, but maintained our target price of Rs5 as we increase the EBITDA multiple to 13.3x (from 10.5x earlier). SELL

* Key variables showed improving prints: VIL had sub loss of just 2mn – same as in the previous quarter. Company has added 4.2mn 4G subs (it has been improving in past few quarters). Gross sub addition has improved to 22mn (vs 13.5mn in past 12 months), which is helping reduce sub loss. Data usage grew 8.2% QoQ to 4,489bn MB as network quality improved.

* Adjusted for IUC impact, revenues down 2.2% QoQ to Rs96bn. VIL’s mobile revenues were stable QoQ if adjusted for 2 days less during the quarter, and IUC impact. This was despite loss of 2mn subs due to rise in 4G subs, which should have helped organic ARPU growth. On reported basis, ARPU was down 11.6% QoQ to Rs107. Postpaid sub base has grown marginally by 0.1mn to 20.9mn, which should have also helped. Minutes continued to decline (down 3.3% QoQ and 14% YoY), to 529bn.

* Cash EBITDA (adjusted for Ind-AS 116) at Rs22bn. EBITDA at Rs44bn was up 2.9% QoQ due to one-off gains in cost (network and IT) of Rs4.5bn; adjusted EBITDA dipped 7.6% QoQ despite strong efficiency in cost savings. Adjusted for one-offs, network cost was down 1.1% QoQ, employee cost fell 13% QoQ while SG&A cost rose 18% QoQ due to higher selling and marketing expenses. Adjusted for Ind-AS 116, EBITDA was Rs22bn (up 3% QoQ and down 18% QoQ if we adjust for one-off gains). EBITDA should have been impacted by nil IUC revenue as VIL was net IUC receiver earlier.

* Total debt including AGR dues and accrued interest was Rs1,867bn. The figure includes deferred spectrum liability of Rs963bn, AGR liability of Rs610bn, and bank borrowing of Rs231bn. The liabilities due for payment in next 12 months are: 1) annual payment (includes interest) towards AGR liability of Rs80bn in Mar’22 (this is assuming nil payment for Mar’21 dues, which is yet to be clarified); 2) bank guarantee of Rs70bn coming up for renewal (the company has to give additional bank guarantee of Rs10bn); 3) annual payment towards spectrum due in Apr’22 – of Rs82bn. Company has requested DOT for deferment of some of the payments due to cashflow crunch. We see payment of liabilities coming soon, while fund availability remains a challenge.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer