Detailed Rationale

Crisil Ratings has assigned its ‘Crisil A-/Stable’ rating to the proposed bank facilities of Vodafone Idea Ltd (VIL).

 

The ratings factor in the strategic importance of VIL for the Aditya Birla Group (ABG, the group) and the financial, operational and managerial support to be provided by the group to VIL. ABG sees VIL as a strategically important entity and recent appointment of Mr. Kumar Mangalam Birla as VIL’s chairman highlights strong management control of the group. ABG has articulated strong support to ensure timely debt servicing and continuity of operations of VIL. In the past, the group has supported VIL during periods of stress by ensuring timely debt servicing and creditor payments from VIL through equity infusions and other financing. In addition to the sizeable past investments, with anticipated turnaround in operations leading to improved cash flows, the group expects significant long-term economic benefit from VIL. The recent announcement of the group committing subscription of share warrants aggregating to Rs 4,730 crore underscore the commitment of the group.

 

The ratings also reflect VIL’s meaningful market position in the Indian mobile services market with a subscriber market share of 15.68% as of March 2026 (based on data from TRAI) and its presence across all the 22 telecom circles. While the company has been losing subscribers and market share in the past, the subscriber loss is expected to be arrested on the back of planned investments over the next 2-3 fiscals and resultant improvement in service levels. Underinvestment in capex to expand 4G network coverage has led to fall in subscriber base from 29.1 crore at the end of March 2020 to 19.8 crore at the end of March 2025. However, the subscriber loss has reduced significantly during fiscal 2026 with net additions in the last two months of fiscal 2026. VIL commenced a phased capital expenditure program to expand 4G coverage and roll out 5G services across priority circles to address the higher subscriber churn. The company has incurred capex of around Rs 18,000 crore cumulatively in fiscals 2025 and 2026 funded largely through equity proceeds. VIL has raised equity of around Rs 26,000 crore since March 2024, including Rs 18,000 crore through a follow-on public offering (FPO) and balance via promoter contribution and conversion of vendors dues to equity. The capex undertaken by VIL led to increase in its 4G network coverage from around 77% in March 2024 to nearly 86% in March 2026 leading to arrest in decline in subscriber base from quarterly run rate of around 4 million to around 0.1 million in the last quarter of fiscal 2026. Improvement in network coverage and quality should reduce the subscriber churn and retain high value customers leading to growth in subscriber base and improvement in subscriber mix. Better operating performance is also being driven by increase in blended average revenue per user (ARPU) to Rs. 174 in the last quarter of fiscal 2026 from Rs. 146 in the last quarter of fiscal 2024 owing to change in subscriber mix and tariff hikes taken in July 2024. ARPU is expected to improve, led by conversion from 2G customers to 4G customers, voice-only plans to data plans, rising data usage and future tariff hikes, thereby aiding cash flow generation.

 

Planned capex of Rs 45,000 crore, to be incurred over fiscal 2027 to 2029, should increase operating revenues, earnings before interest, taxes, depreciation, amortisation and rentals (EBTIDAR) and hence higher cash flow generation. The capex will be prioritised in 17 circles so as to enhance the4G network coverage and add5G sites. For the planned capex of Rs 45,000 crore over fiscal 2027 to fiscal 2029, the debt funding tie-ups are at advanced stages. With expected improvement in business, resolution of AGR dues, along with presence of ABG and its financial flexibility is expected to help the company tie-up finance on competitive terms. Timely scaling up of capex remains critical for improving network competitiveness, growing subscriber base, and supporting ARPU expansion. The envisaged growth in subscriber base on a sustained basis and improvement in ARPU will remain key rating sensitivity factors.

 

That said, despite some improvement in operating performance and reduction in external debt and other liabilities, VIL’s financial profile remains weak primarily due to elevated spectrum liabilities (around Rs. 1.2 lakh crore as on March 31, 2026). Upcoming spectrum liabilities remain high with scheduled payments of Rs 15,310 crore in fiscal 2028 and Rs 26,937 crore in fiscal 2029. In case of delay in expected ramp up in subscriber base or ARPU, the company may see a cash flow mismatch. In such a situation, VIL may priortise external debt repayment in line with the past trend and modularity of capex provides flexibility. However, Crisil Ratings expects the group to extend support in case of cash flow mismatches, predominantly arising out of sizeable spectrum dues. External debt remain low at present as VIL has significantly reduced its external debt from banks and financial institutions from Rs 27,350 crore as of March 31, 2020 to Rs 4,026 crore as of March 31, 2026 along with clearing of outstanding lease liabilities to tower companies by end of fiscal 2026. Significant improvement in the business risk profile will be essential for enhancement in financial flexibility of the company.

 

Crisil Ratings also takes note of the recent announcement on resolution of AGR dues by the Department of Telecommunication (DoT). The liabilities pertaining to AGR have reduced to Rs 64,046 crore from Rs 87,695 crore with minimal repayments till fiscal 2035. This should ease pressure on cash flow position over the near to medium term. Earlier, the Government of India provided relief to VIL by conversion of spectrum dues of Rs 36,950 crore in March 2025 and Rs 16,133 crore in February 2023 to equity. While the government currently owns 49% shareholding, it is not classified as promoter, and it does not have a representative on the board. Post conversion of spectrum dues to equity, ABG’s shareholding has come down to 9.57%. Despite that, the economic incentive and importance of VIL in the group’s strategy for the future remains significant, given the substantial economic benefit from VIL in the long run. Also, with the recent announcement on equity infusion, ABG’s share will increase to nearly 13%.

 

The company is also exposed to the regulatory and technological risks inherent in the telecom industry.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of VIL and its subsidiaries. This is because all these companies operate in the same business with strong financial and operational linkages. 

 

Crisil Ratings has also factored in managerial and financial support from the Aditya Birla group in case of an exigency.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Strong operational, managerial and financial support from the Aditya Birla Group

VIL has a close oversight from ABG, with Mr. Kumar Manglam Birla serving on the Board of VIL as Chairman. He is also the chairman in key group entities such as Aditya Birla Capital Ltd, Grasim Industries Ltd, Hindalco Industries Ltd and Ultratech Cement Ltd.

 

The management control of ABG in VIL is not expected to be diluted and the group will continue to maintain its board representation. Being the group's flagship company in the telecom sector, VIL should benefit from the group's experience in handling businesses in diverse industries. Additionally, VIL shall benefit from the group’s financial flexibility.

 

ABG has extended financial support to VIL in the past as well by infusing equity and arranging other means of financing so as to ensure timely debt servicing and payments to operational creditors. This has helped VIL manage through period of liquidity stress and also reflects the commitment of the group towards the company. The group has articulated strong and timely support going forward as well.

 

The group (via group companies and promoters) held 9.57% of equity shares in VIL as on March 31, 2026. Despite infusing around Rs 10,000 crore in VIL, since the merger of Vodafone India Ltd into Idea Cellular Ltd in 2018, the stake has reduced from 26% at the time of the merger. This was on account of conversion of government dues amounting to Rs 53,083 crore in February 2023 and March 2025 to equity, rights issue of Rs 25,000 crore in May 2019, and FPO of Rs 18,000 crore in March 2025. The group has articulated to maintain its shareholding in the company. Furthermore, VIL will continue to be strategically important to the group from a long-term perspective.

 

The recent announcement of equity infusion by the group through share warrants aggregating up to Rs 4,730 crore, also demonstrates its commitment towards VIL. Post conversion of warrants into equity within 18 months from the allotment, the shareholding of the group will increase to 13.02%.

 

Successful raising of funds from promoters and market

VIL has raised equity of Rs 18,000 crore from external investors through an FPO in April 2024 demonstrating financial flexibility and investors’ confidence in business. Further VIL has raised Rs 3,300 crore via NCDs under private placement, through a wholly owned subsidiary during fiscal 2026. Further, ABG and the Vodafone group have infused equity of Rs 2,075 crore by ABG and Rs 1,910 crore, respectively, in fiscal 2025. Recently, ABG has announced additional equity infusion of Rs 4,730 crore through share warrants to be converted over next 18 months.

 

The Vodafone group has earmarked part of its stake towards VIL, and this should benefit the latter. As per a Contingent Liability Adjustment Mechanism (CLAM) agreement between VIL and Vodafone Plc, VIL also now has access to 328 crore of shares owned by Vodafone Plc, and these shares can be sold in market over a period of five years. These funds will be available for use by VIL for its future requirements, adding to financial flexibility of company. Additionally, Vodafone Group has also provided financial support to VIL by infusing equity in the past. VIL’s ability to tie up the funding for its planned future investments, however, remains a key monitorable.

 

Improved fundamentals of the telecom industry

The domestic telecom industry has witnessed a structural improvement over the past few years, supported by industry consolidation and tariff hikes. Further, rising digital adoption and sizable investments in digital infrastructure will drive the growth in the sector. Telecom sector requires significant investments which create high entry barriers. The reduced competitive landscape has enabled telecom operators to take timely tariff hikes and improve their ARPU, resulting in healthy operating cash flow. Additionally, sustained growth in digital adoption, increasing smartphone penetration, and higher usage of data-intensive applications continue to support improvement in ARPU and revenue visibility.

Key Rating Drivers - Weaknesses 

Modest but improving business risk profile:

VIL’s subscriber market share was around 16% at end of fiscal 2026 which has been on declining trend due to underinvestment in capex to expand 4G network coverage. There is a significant gap between VIL and the next largest player with a subscriber market share of around 38%. However, the subscriber loss has reduced significantly during fiscal 2026 with net additions in last 2 months. The phased capex programme, aimed at expanding 4G coverage and rolling out 5G services across priority circles has helped in arrest the subscriber churn. The network investment has also shown promising growth in subscribers in key circles such as Maharashtra and Uttar Pradesh East as network coverage have also improved. VIL being a joint venture between Aditya Birla Group and Vodafone Group, the global presence and expertise of the latter is expected to benefit VIL in terms of technical know-how.

 

Proceeds from the FPO, along with internal accrual, have helped VIL fund its network investment of around Rs 18,000 crore cumulatively over fiscals 2025 and 2026. VIL’s 4G network coverage has grown from 77% in March 2024 to 86% in March 2026. The management plans to expand this further to 95% in the 17 priority circles, over the next 2–3 years. The overall broadband tower sites have increased from 4,30,705 at end of fiscal 2024 to 5,66,376 by end of fiscal 2026.

 

Further, blended ARPU has improved to Rs 174 in the last quarter of fiscal 2026, from Rs 146 in the last quarter of fiscal 2024, led by uptrading by customers and tariff hikes. ARPU may improve further with rising data usage and expected tariff hikes, thereby aiding cash flow generation over the medium term.

 

Weak financial profile on account of significant deferred payment liabilities

VIL’s negative networth owing to losses and significant debt have constrained the debt metrics resulting in a weak financial profile. Overall gross debt stood at Rs 192,553 crore for the year ended March 31, 2026, comprising deferred spectrum liabilities (62%), and followed by AGR liabilities (nearly 13%; present value as per the balance sheet), lease liabilities (around 22%) and external debt (3%).

 

Nevertheless, GoI’s decision to defer payment of AGR dues by an additional 10 years (minimal annual payment of Rs 100 – 124 crore in the first 10 years) leads to a high residual maturity period with no interest accrual on the AGR liability. The resolution of AGR dues has eased liquidity pressure. That said, VIL will have high spectrum liabilities of Rs 15,310 crore in fiscal 2028, Rs 26,937 crore per fiscal 2029 to 2031 and Rs 26,588 crore in fiscal 2032, before moderation from fiscal 2033. While the near to medium term payments towards spectrum liabilities are sizable, availability of spectrum will support cash accruals over the long term. These high liabilities will continue to have a bearing on the standalone financial risk profile in near to medium term. Nevertheless, operating cash flow and financial flexibility should help company in meeting these liabilities.

 

Exposure to regulatory and technological risks

Regulatory and policy changes play a central role in defining risk characteristics of the Indian telecom sector. The sector also remains susceptible to technological changes, with capex cycles every 8 – 10 years. New technology sector could necessitate fresh investments or an overhaul of the existing networks. For instance, with the launch of 5G services, players had to make significant investments in laying networks even after incurring sizable capex for 4G networks, the previous few years.

Liquidity Adequate

VIL had outstanding external debt of around Rs 4,026 crore as on March 31, 2026 along with spectrum liability of Rs 120,200 crore and AGR liability of Rs 25,254 crore (at present value). In fiscal 2027, VIL has repayment of Rs 726 crore towards external debt and Rs 7,730 crore of spectrum dues as against expected cash accrual of around Rs 7,400 crore. Spectrum repayments will further increase to Rs 15,310 crore in fiscal 2028 and Rs 26,937 crore in fiscal 2029 against which the cash accrual may remain insufficient. Crisil Ratings expects the group to support the company in case of cash flow mismatches, predominantly arising out of sizeable spectrum dues.

 

Liquidity is also supported by cash and cash equivalents of Rs 3,715 crore as on March 31, 2026, and realisation of proceeds from 328 crore shares of VIL under CLAM settlement over five years. By virtue of its association with ABG, VIL has strong financial flexibility.

Outlook Stable

The outlook is based on expectation of continued improvement in subscriber base, ARPU and hence the overall operating performance, driven by a planned capital expenditure of Rs 45,000 crore over the next three fiscal years. The future investments and servicing of liabilities will be funded by expected improvement in cash flow from operations, and debt raise as well as expected support from the Aditya Birla Group.

Rating sensitivity factors

Upward factors

• Higher than expected improvement in VIL’s operating performance resulting in improved cash flow

 

Downward factors

• Lower than expected improvement in VIL’s operating performance
• Any change in support philosophy by ABG towards VIL
• Any unforeseen regulatory liability impacting credit profile

About the Company

Vodafone India Ltd and its subsidiary Vodafone Mobile Services Ltd merged into Idea Cellular Ltd (ICL) on August 31, 2018. Consequently, the company was renamed as VIL, which represents a partnership between ABG and the Vodafone group. The company offers voice and data services on 2G, 4G and/or 5G technologies across 22 service areas in India. It has 192.8 million subscribers as on March 31, 2026, of which nearly 67% are 4G/5G subscribers and a blended ARPU of Rs 174. The company has 8,030.4 MHz of spectrum across different frequency bands, out of which 8,012.8 MHz spectrum is liberalised and can be used for deployment of any technology. The company also has the mid band 5G spectrum (3300 MHz band) in 17 priority circles and mmWave 5G spectrum (26 GHz band) in 16 circles.

About the Aditya Birla Group

ABG is one of one of India’s largest business conglomerates and a leading multinational enterprise, globally employing over 227,000 people. With revenue exceeding $67 billion in fiscal 2025, the group derives its strength from leadership market positions across a diversified portfolio, including cement (Ultratech Cement Ltd, rated 'Crisil AAA/Stable/Crisil A1+'), metals (Hindalco Industries Ltd, rated 'Crisil A1+'), fashion and retail (ABFRL, rated ‘Crisil AA+/Stable/Crisil A1+'), telecom (VIL), financial services (Aditya Birla Capital Ltd, rated 'Crisil AAA/Crisil AA+/Stable/Crisil A1+'), chemicals (Grasim Industries Ltd, rated 'Crisil AAA/Stable/Crisil A1+'; Birla Carbon India Pvt Ltd, rated 'Crisil AA/Stable'), etc. The group operates across six continents and 40 countries. Headed by Kumar Mangalam Birla, it is headquartered in Mumbai, Maharashtra.

 

About the Vodafone group

The Vodafone group is a leading European and African telecom company, headquartered in UK. With revenue exceeding GBP 40 billion, the group caters to more than 360 million mobile and broadband customers and operate networks in 15 countries. The group has capacity of more than 70 subsea cable systems. It also runs Internet of Things platforms, with over 220 million connections globally, and provides financial services to around 94 million customers across seven countries in Africa.

Key Financial Indicators (Consolidated numbers)

As on / for the period ended March 31		2026	2025
Operating revenue	Rs crore	45,514	44,592
Adjusted profit after tax (PAT)*	Rs crore	34,552	(27,384)
Adjusted PAT margin	Rs crore	75.9%	(61.4%)
Adjusted net debt/EBITDAR**	Times	9.9	12.4
Interest coverage***	Times	0.74	0.88

Note: These numbers are adjusted for the analytical treatment of Crisil Ratings and may not represent the numbers reported by the company.

* Includes one-time gain pertaining to revision of AGR dues amounting to Rs 58,116 crore

** Debt includes external debt, lease liabilities, spectrum liabilities and AGR liabilities

*** Includes interest costs charged to statement of profit and loss for that fiscal

Any other information: Not applicable