Vodafone Idea’s Survival Hinges on Government Support and Bank Funding

There has been a persistent back-and-forth between the government and India’s third-largest telecom operator, Vi, since March this year, when the Ministry of Communications became its largest shareholder by converting ₹36,950 crore worth of spectrum auction dues into equity. While the move provided significant relief to the Aditya Birla Group and Vodafone Group PLC-promoted company, it is not sufficient to keep it afloat for long. Analysts warn that Vi still needs active government support to “remain a going concern.” It also requires fresh bank funding to finance its expansion plans and maintain relevance in a market dominated by Reliance Jio and Bharti Airtel.

Last month, Vi called an Extraordinary General Meeting to amend the company’s shareholders' agreement to allow its promoters, Aditya Birla Group and Vodafone Group PLC, to retain management control over the company—even as their combined shareholding remains just around 25.6%.

In March, the Indian government became the largest shareholder of the company by converting ₹36,950 crore of spectrum dues into equity, taking its total shareholding from 22.60% to approximately 48.99%. The government had first acquired shares in a similar move to provide relief to the firm in February 2023.

All this was done to prevent the collapse of Vi under the burden of ever-rising so-called "adjusted gross revenue (AGR) dues"—a backlog of unpaid spectrum licence fees, usage charges and interest, penalties and interest on penalties that had accumulated on Vi and other Indian telecom companies since the early 2000s. Outlook Business has extensively discussed how India's telecom industry got stuck in the AGR loop, with Vi becoming its biggest casualty.

While two government relief packages have helped Vi remain afloat, it’s not enough to expand its capabilities, especially in 5G customer acquisition, where Airtel and Jio dominate. For that, the company needs funding. On June 27, Vi shareholders approved a plan allowing the company to raise up to ₹20,000 crore by selling new shares or other financial instruments.

During an investor presentation on June 20, Vi outlined a massive capital expenditure (capex) plan of ₹50,000–55,000 crore focused on strengthening its network. The plan includes expanding 4G population coverage in 17 priority circles, deploying 4G on the sub-GHz 900 MHz band in 16 circles, launching 5G services in key cities and regions and increasing overall capacity to meet rising data demand.

Vi also noted it had spent ₹9,570 crore on capex in the financial year 2025, resulting in a 31% increase in 4G data capacity and a 6% rise in 4G population coverage.

How Vi Plans to Reach ₹55,000 Crore

According to a recent report by ICICI Securities, this plan was first outlined in 2024. The brokerage noted that Vi has raised over ₹20,000 crore in equity in recent quarters and has some internal funds. However, to complete the network expansion, Vi also needs ₹25,000 crore in debt funding, which has been under discussion for the past few quarters.

“The company likely has enough cash to continue capex until Q2 financial year 2026 but may need outside funding to complete the plan after that,” the brokerage said in a report on July 7.

However, Vi management has repeatedly said that banks are reluctant to provide loans. During the fourth-quarter earnings call, Vi chief executive Akshaya Moondra told analysts that after the government's equity conversion, they began re-engaging with banks.

“Generally, our discussions with the banks showed that they needed more clarity on AGR. The conversion, of course, has been a big step forward. So, I would say that the banks would want some clarity on the AGR dues. While that is happening, it is not preventing discussions from continuing,” he said on June 2.

While the government has not yet provided clarity on whether it will offer more assistance, the telecom firm has again turned to the Supreme Court—where the entire AGR issue began.

In early May 2025, Vi filed a fresh petition in the apex court requesting a waiver of interest, penalties and interest on penalties on its AGR liabilities—seeking relief on over ₹45,000 crore out of the total ₹76,000 crore it owed as of March 31. Within weeks, the court dismissed Vi’s petition, calling it ‘misconceived’ and denying relief.

However, there was a caveat in the ruling. “If the government wants to help you, let them. We are not coming in the way,” the bench led by Justices J B Pardiwala and R Mahadevan remarked.

Ball’s in Govt’s Court

“And I see no reason why the government should be constrained in any way to offer relief,” Vi chief executive, Moondra said during the June 2 call. He referred to the 2021 reforms package that aimed to prevent a duopoly in the telecom sector.

“When the reforms package was announced in 2021, there was a PIL filed in the Supreme Court. Even then, the court had said it was a policy matter within the government’s purview and that it would not interfere. So, in some ways, if you look at the reforms package of September 2021, the government had taken the initiative,” he said.

But since then, a slew of source-based reports citing government officials, various interviews, and remarks by Union Minister of Communications Jyotiraditya Scindia have kept Vi, its shareholders and market watchers on edge.

“The government has not taken any decision on Vi’s AGR dues as of now,” Scindia told NDTV Profit on June 3. “We will stand by the Supreme Court’s order… No decision from the government side as of now.”

“We have converted ₹36,000 crore of our dues into equity. We are now at 49% holding in Vi and we do not intend to increase that equity,” he told Business Standard on June 23.

Speaking at a Broadband India Forum event on June 24, the minister said there is intense competition in the country among internet service providers. “Our job is to provide as many avenues as possible and within each vertical, provide intense competition. It’s not good enough having a duopoly of one or two carriers,” Scindia said.

On the same day, The Economic Times, citing ministry officials, reported that the government is considering relief for Vi by extending the repayment period for AGR-related dues from the current six years to 20 years.

Another option under consideration is allowing Vi to make a token annual payment of ₹1,000–1,500 crore toward its dues until a final resolution is reached on the broader AGR matter. The report, combined with Scindia’s comments, cheered investors, sending Vi’s stock up as much as 7% on June 24.

“We have not received any communication from the government in relation to the above-reported matter. As and when there is any development which requires disclosure, we will do the needful,” Vi told the stock exchange, dashing hopes of any near-term resolution.

How Large Are AGR Liabilities?

“The company’s survival and growth depend on government support, including conversion of dues into equity and waiver of bank guarantee (BG) requirements for spectrum auctions,” said Geojit Financial in a June 17 report. It added that the company has a substantial debt of ₹2.14 lakh crore. Although it has been reduced by about ₹24,000 crore since March 2024, the debt still exists.

Vi’s bank debt reduced by approximately ₹1,710 crore during financial year 2025 and stood at ₹2,330 crore as of March 31, 2025. The company also had AGR dues of around ₹76,000 crore, including accrued interest, which need to be paid. The settlement asset is not receivable unless these dues are cleared.

“The company’s capex for financial year 2026, beyond the existing commitment of ₹5,000–6,000 crore, is contingent upon the successful completion of a debt fundraising process, which has so far remained challenging,” the brokerage noted.

It further stated that the company’s survival and growth are contingent on government support and its capital expenditure plans remain uncertain due to funding constraints.

Motilal Oswal, on June 2, said Vi management has indicated that financial year 2026 capex beyond the current commitment of ₹5,000–6,000 crore depends on the successful closure of a debt fundraise, which the brokerage says “has been elusive so far.”

“With no relief so far on AGR dues (repayments commence March 2026) and no breakthrough on the debt raise, we believe Vi is likely to face an annual cash shortfall of approximately ₹20,000 crore and may be unable to meet its capex guidance of ₹50,000–55,000 crore over financial year 2025–2027,” said the brokerage.

Kotak Institutional Equities took a similar stance, adding, “Vi remains a high-risk, high-reward play, with long-term revival contingent on continued government support and moderation in competitive intensity.”