CARE Ratings revises Vodafone Idea outlook to ‘Positive’ on AGR relief, capex plan

Credit rating agency CARE Ratings has revised the outlook on Vodafone Idea’s (Vi) long-term bank facilities to ‘Positive’ from ‘Stable’ on Friday, while maintaining the ‘BBB’ rating on the company’s adjusted gross revenue (AGR) dues relief, Vodafone Idea said in a statement.

The rating agency said the outlook upgrade reflects improving business prospects for the debt-laden telecom operator, driven by regulatory relief on AGR dues, the completion of the CLAM settlement, and Vi’s planned Rs 45,000 crore capital expenditure over the next three years. The revision to a Positive outlook comes after the Department of Telecommunications (DoT) announced AGR relief, which is expected to strengthen Vi’s ability to secure long-term debt and accelerate network capex investments.

Earlier this month, the Centre deferred Vodafone Idea’s AGR dues repayment by 10 years, freezing about Rs 87,695 crore without any interest accrual. The move is expected to ease near-term liquidity pressures for the telecom operator.

However, CARE Ratings cautioned that Vi’s financial risk profile remains weak, primarily due to high leverage stemming from large statutory liabilities related to spectrum and AGR dues. As of December 31, 2025, Vi’s total bank debt stood at around Rs 1,126 crore, while its total spectrum and AGR payment obligations payable over time were estimated at Rs 1.94 lakh crore.

CARE noted that while the AGR deferral significantly reduces near-to-medium-term cash outflows, spectrum-related dues are likely to increase sharply from FY28 onwards. The company’s ability to meet these obligations will depend on the timely execution of network capex, tariff hikes, and operating leverage-led improvement in cash flows.

Under the amended CLAM agreement, Vi is expected to receive Rs 5,836 crore from Vodafone Group over the next five years — Rs 2,307 crore in cash in the next 12 months and the remainder through sale proceeds of shares earmarked for Vi’s disposal. The agency said that increases in the market value of the earmarked shares would accrue to Vi, enhancing promoter contribution to planned capex.

CARE added that a timely scale-up of Vi’s capex plan will be essential for the company to improve competitiveness with larger rivals Reliance Jio and Bharti Airtel, grow its subscriber base and drive a rise in average revenue per user (ARPU). The rating agency lastly highlighted expectations of a telecom tariff increase in FY27, which, combined with a better subscriber mix and robust demand, could support improvements in ARPU across all operators, including Vi. Sustained improvement in subscriber trends, ARPU and profit before interest and tax (PBILDT) were described as key rating sensitivities going forward.