Lenders to Vodafone Idea are a worried lot with the telco struggling to manage cash flows within the wake of subscriber losses and a mounting debt pile with AGR dues owed to the govt on top of it. the cupboard approval for a moratorium of 4 years on AGR and spectrum dues has come as an enormous relief for banks with an outsized exposure to the telco.

The banking sector features a total exposure of around Rs 29,000 crore to Vodafone Idea. While the country’s largest bank, depository financial institution of India, has the very best exposure of Rs 11,000 crore, mid-sized banks like IDFC First Bank, Yes Bank and IndusInd Bank, rank high in exposure to Vodafone Idea as a percentage of their total book size.

Servicing debt

CLSA estimates Vodafone Idea will see $11 billion in income savings till FY25, which can give the telco room to service its debt. it’ll also cut the urgency on the corporate to boost tariffs for survival during a fiercely competitive telecom market.

UBS, in its report, said that the income savings also will give Vodafone Idea the power to extend capex, which is important to prevent market share loss.Speaking to Moneycontrol, a top banker with exposure to Vodafone Idea said: “Banks’ fate is tied to the performance and survival of the telco and that’s the rationale why the lenders had also requested the govt to supply some relief to the telecom sector, which is battling huge debt and therefore the added AGR burden.”

IDFC First Bank’s Vodafone Idea exposure stands at 2.9 percent of its lending book, while YES Bank’s is at 2.4 percent and IndusInd Bank’s at 1.65 percent. The three banks account for around Rs 11,000 crore of Vodafone Idea’s total debt. ICICI Bank, Axis Bank and HDFC Bank have also extended loans to the telecom service provider.