Are Vi's bad days over? This government decision will change the company's fortunes!

There's news of relief for millions of Vodafone Idea (Vi) customers and investors. If you use a Vi SIM and were worried about the company's future, the government's new plan brings a ray of hope. 

According to reports, the government is preparing to provide significant relief to this cash-strapped telecom company. This could include not only a longer loan repayment period, but also a significant reduction in the total debt amount.

You may get extra time to repay your loan.

According to the latest information, the government is considering granting Vodafone Idea a four- to five-year moratorium on its Adjusted Gross Revenue (AGR) dues. 

Simply put, this means the company will not have to pay installments for the next four to five years. Most importantly, this moratorium could be interest-free. Currently, the company has statutory dues of over ₹83,000 crore.

Under current regulations, Vi is required to pay an installment of over ₹18,000 crore in March. If the government approves this relief package, the company will be relieved of the worry of immediately arranging such a large sum. 

The company will be able to use this money to improve its network and enhance 5G services, which will directly benefit its customers.

Will Vodafone Idea's burden be halved?

Not only is the timeframe, the government is also considering reducing the total amount of debt. According to a report in the Economic Times, the company's outstanding debt could be reduced by nearly half after a reassessment of liabilities. 

A special committee will be formed to address this issue. This committee will be headed by a secretary-level official and will hear from both the Department of Telecommunications (DoT) and Vi.

This committee will determine the final amount the company must pay. Once the 4-5 year moratorium period ends, the company will have to pay the remaining amount in six installments. 

Interestingly, no new interest will be added to this outstanding amount in the future, thus preventing further burden on the company. It should be noted that until now, the company had to pay a hefty compound interest rate of 29-30% annually on the outstanding amount.

Mathematics of government share

The government itself is the largest shareholder in Vodafone Idea, holding 48.99% of the company. This initiative by the government is crucial because the company is in dire need of fresh investment. If this relief package is passed, it will be easier for the company to raise ₹25,000 crore from the market.

There are also reports that Tillman Global Holdings, a New York-based private equity firm, is in talks to make a major investment in Vi. This investment could range between ₹35,000 and ₹52,800 crore ($4-6 billion). 

However, investors will only invest if they are confident that the government will not let the company collapse. The Supreme Court also recently allowed the government to create a special package for the troubled company. This decision could be officially announced in the coming weeks after Cabinet approval.