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Balance sheet of Voda Idea hit by losses

The embattled company’s reserves and surplus account was completely eroded by the loss in H1 of FY20.

, ET Bureau|
Updated: Nov 16, 2019, 08.54 PM IST
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ET Intelligence Group: A closer look at the balance sheet of Vodafone Idea reveals its fragile financial health, which fails to offer much comfort to investors. For starters, the company’s reserves and surplus account was completely eroded by the net loss of Rs 55,795.8 crore in the first half of FY20, which includes Rs 50,921.9 crore loss in the September 2019 quarter.

The reserves account was negative Rs 4,666.8 crore at the end of September compared with Rs 50,899.2 crore at the end of March 2019. As a result, the company’s total equity, which includes reserves, surplus and the equity capital shrank to Rs 24,068 crore compared with Rs 59,634.8 crore in the previous fiscal. This pushes the company in a precarious situation since another major loss in the future would make its networth negative, which would in turn affect its credit ratings.

The total debt has increased by 31% to Rs 2.2 lakh crore from the end of FY19. The debt-equity ratio after excluding cash and equivalents shot up 4.2 times from 1.8 times by similar comparison. Also, debt relative to the operating profit before depreciation and amortisation (debt/EBITDA) was 10.2 times. This is way higher than the ratio of four times for Bharti Airtel, the larger peer. A larger ratio suggests a higher debt burden on operations.


A major concern is that the company’s operations may not be able to sustain these levels of indebtedness at a time when it has been reporting a shrinking subscriber base. It gradually fell to 31.1 crore in the September 2019 quarter from 42.2 crore in the year-ago quarter.

During the same period, Bharti’s user base fell by a lesser margin to 27.9 crore from 33.2 crore. Also, Vodafone Idea’s revenue fell by 3.8% sequentially to Rs 10,844 crore in the September quarter, whereas Bharti’s topline grew by 2% quarter-onquarter to Rs 21,131.3 crore.

Given the deteriorating financials and rising debt burden, Vodafone Idea’s valuation looks stretched. At Friday’s closing stock price of Rs 3.7, its enterprise value (EV) relative to EBITDA was over 11. Bharti Airtel’s EV/EBITDA was around nine considering the Friday’s closing stock price of Rs 393.2.

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