In what could be a potential fund booster for Vodafone Idea, UK-based Vodafone Plc has said that it has a maximum exposure of 1 billion pounds to Indian telecom firm.
In other words, that means the company has to contribute up to that much amount towards paying Vodafone Idea's labilities based on the terms agreed during signing the Vodafone Idea merger deal.
"The Group's potential exposure under this (contingent liability) mechanism is capped at Rs €1.0 billion (Rs 8,400 crore) and any cash payments or cash receipts relating to these contingent liabilities and potential refunds must have been made or received by Vodafone Idea before any amount becomes due from or owed to the Group," the company said.
It added that Vodafone Plc has potential exposure to certain contingent liabilities and potential refunds relating to Vodafone India and Idea Cellular at the time of the merger, including those relating to the AGR judgement, “whereby Vodafone Group and Vodafone Idea would reimburse each other on set dates following any crystallisation of these pre-merger liabilities and assets.”
“Under the terms of this arrangement, Vodafone Group is obliged to make payments to Vodafone Idea where amounts paid pursuant to the contingent liabilities of Vodafone India exceed those of Idea Cellular,” the company said.
Vodafone Idea's AGR liability stands at approximately Rs 53,000 crore.
Addressing the liability, the statement pointed out that the group had already paid out $200 million to Vodafone Idea for amounts that are likely to be due in September 2020 under the terms of the mechanism. The payment was advanced to help the company deal with the coronavirus crisis.
"Having considered the payments made and refunds received by Vodafone Idea in relation to these matters, including those relating to the AGR case, and the significant uncertainties in relation to VIL's ability to settle all liabilities relating to the AGR judgement, the Group has assessed a cash outflow of €235 million under the agreement to be probable at this time and provided for this amount at 31 March 2020. On 22 April 2020, the Group announced that it had made an advance payment of US$200 million to Vodafone Idea.”