Auditor suspects V! ‘ability to stay as ‘going concern’

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The loss line raised concerns over the telecom operator’s ability to continue telco’s “concern” to the auditor. Analysts have set a low price target of Rs 5 on the stock, suggesting a possible fall of 48 percent.

Vodafone Idea NSE shares on Thursday raised their lower circuit limit to 10 percent on the opening bell, after which the company reported a huge loss of Rs 7,022.80 crore for the March quarter.

This was the 11th consecutive quarter loss for the telecom operator and was higher than the Rs 4,589.10 crore loss in the December quarter but less than the Rs 11,711 crore loss for the period a year ago.

Auditor SR Batliboi NSE-0.32% and Associates in its quarterly earnings said the company’s financial performance has affected its ability to generate cash flow which it needs to settle or refinance its liabilities and guarantees. With its financial situation, the content has been in uncertainty, casting significant doubts over the company’s ability to pay and continuing as a ‘going concern’.

The gross debt of the company excluding lease liabilities was Rs 1,80,300 crore, including deferred spectrum payment obligation of Rs 96,270 crore and AGR liability of Rs 60,960 crore, and Rs 23,080 crore loan from banks and financial institutions.

The auditor said the notion of a ‘going concern’ is essentially dependent on Vodafone Idea’s ability to raise additional funds, successful interaction with lenders on sustained support, refinancing of loans, monetization of certain assets, clarity on the next installment amount, acceptance of its moratorium request by Duru and cash flow production from operations.

MD and CEO Ravindra Takkar said the company was actively in talks with potential investors to raise funds. But analysts are not impressed. They are worried about the company’s market share loss, investment, and high average. They have a ‘sale’ rating on the stock.

Credit Suisse has kept an ‘underperform’ rating on the stock with a price target of Rs 7.5. It said Ebitda beat expectations for the March quarter, but it was a big default on the revenue front. The company stood at leverage 21 times, which is unsustainable, it said and cited low investment and market share losses as major negatives.

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