In a significant development for India’s telecom sector, Vodafone Idea (VIL) has received an upgrade in its credit rating from CARE Ratings.
CARE Ratings revised VIL’s long-term bank facilities rating to “CARE BB+” from “CARE B+”, with a ‘Stable’ outlook, and also upgraded the company’s short-term bank facilities to CARE A4+ from CARE A4. This positive revision reflects renewed investor confidence following VIL’s successful fundraise and strategic capex plans.
Key Drivers of the Upgrade:
- Capital Infusion:
VIL raised ₹18,000 crore through a Follow-on Public Offer (FPO) from institutional and retail investors and an additional ₹2,075 crore via preferential issuance to promoter Aditya Birla Group. - Favorable Industry Outlook:
With expected tariff hikes in FY25 and FY26 and an improved subscriber mix, the average revenue per user (ARPU) is forecast to rise across the telecom sector — a key factor aiding VIL’s prospects. - Strong Promoter & Government Support:
The company benefits from backing by Aditya Birla Group and Vodafone Group Plc, and the Government of India holds a 23.77% stake through DIPAM (as of May 31, 2024). - Ambitious Capex Plans:
VIL plans to invest ₹50,000–₹55,000 crore through FY27, targeting expansion in 4G coverage, 5G rollout in key regions, and capacity upgrades to meet rising data demand.
Credit Risks Remain:
While the upgrade is a positive signal, CARE Ratings notes ongoing challenges:
- A weakened financial and business risk profile, with eroded net worth and moderate revenue growth (1.1% in FY24).
- Large debt obligations — ₹4,200 crore in bank debt and optionally convertible debentures, and government dues of ₹2.03 lakh crore related to spectrum and AGR liabilities.
- Regulatory and technological risks inherent to the telecom industry, along with fierce market competition.
Strategic Outlook:
VIL’s focus on stabilizing subscriber churn, expanding its base, and timely execution of its business plan is crucial for future upgrades. The successful tie-up of bank finance and execution of its capex roadmap will be key credit monitors going forward.
Conclusion:
The upgrade to “CARE BB+” with a stable outlook marks a step forward for Vodafone Idea as it navigates a challenging but opportunity-rich telecom landscape. It underscores the importance of capital efficiency, strategic vision, and market positioning — insights FinMen Advisors continues to bring to its credit rating advisory clientele.
Date: April 14, 2025
Source: Business Standard – CARE Ratings upgrades ratings of Vodafone Idea to “BB+” with ‘stable’ outlook
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