Indian mutual fund companies took steps to segregate their investments in Vodafone Idea into separate portfolios, as concerns rise the troubled operator could shutdown over dues owed to the government.
UTI Mutual Fund and Nippon India Mutual Fund released statements explaining they had carved-out their investments in Vodafone Idea’s debt into separate pots. Last month, Franklin Templeton Mutual Fund, also segregated the debt.
Vodafone Idea was dealt a further blow as credit company Care Ratings downgraded its bonds and loans rating.
The move by the mutual funds indicates they are struggling to protect the value of the investment made in the debt, as Vodafone Idea faces up to a crisis and a possible default.
Operations becoming unviable
The company has been rocked over fees it owes to the Indian government in adjusted gross revenue (AGR). It vowed to make a payment of INR25 billion ($350 billion) towards the total INR530 billion bill yesterday (17 February), as it looks to stagger payments.
However, last week the Supreme Court ruled all operators must make the full payment immediately, while dismissing pleas from Vodafone Idea for relief.
The situation could see further penalties and interest levied on the operator.
In its statement, Nippon India said: “In light of no further relief and the Supreme Court’s reiteration of the requirement to make the payment imminently, the company’s operations are likely to become unviable unless there is significant equity infusion.”
“The promoters of Vodafone India have hinted that they will be unable to continue the operations of the company on a going-concern basis unless there is meaningful relief on the AGR dues.”Subscribe to our daily newsletter Back