In a stock exchange filing on Monday, Vodafone Idea informed that Care Ratings Limited (CARE), has downgraded its rating on Long Term Bank Facilities and Non-Convertible Debentures (NCDs) as on 17 February.
Ratings on Long Term Bank Facilities as well as NCDs were downgraded from CARE BBB- (Credit Watch with Negative Implications) to CARE BB- (Credit Watch with Negative Implications).
The filing further said that "the downgrade inter-alia, is on account of significant erosion in the overall risk profile of the company while taking into cognizance of the financial impact of no relief being granted on modification plea on 14th February 2020 of telecom companies (telcos) seeking new schedule of Adjusted Gross Revenues (AGR) dues by Hon'ble Supreme Court and significant losses to the tune of Rs 6,453 Crores in Q3FY20."
After reporting a net loss of Rs 6,453 crore for the December ended quarter, the telecom operator had placed its ability "to continue as a going concern" on the 14 February Supreme Court verdict.
Speaking of difficulty raising capital amid existing mounting debt and statutory dues amid sectoral competition, the company said, "During the quarter, the credit rating of certain borrowings have been revised to "BBB-. As a result, certain lenders have asked for increase of interest rates for which the Company is in discussion with such lenders."
A further downgrade in ratings creates more trouble to raise funds without any relief from the government on AGR-related dues.
The company had also said that "material uncertainty exists that cast significant doubt on the Company's ability to continue as a going concern and its ability to generate the cash flow that it needs to settle, or refinance its liabilities including those relating to SC AGR judgement and guarantees as they fall due."
In a separate statement, Vodafone Idea said its board has authorised immediate payment of Rs 2,500 crore in part payment towards dues to the Department of Telecom. It also said that Rs 1,000 crore more will be paid by the end of this week.
"The board will take further stock of the situation to see how further additional payments can be made," it added.
While shares of Vodafone Idea revived on Monday on hopes that it will be able to withstand the financial strain, it fell on Tuesday and was among the most actively traded stock for the day following the rating downgrade.