According to Kotak Institutional Equities, Vodafone Idea (Vi) may face an annualised cash flow shortfall of at least $3.1 billion in absence of any policy relief or tariff hike.

Vi’s first quarter (Q1) FY22 results were fraught with challenges from the second wave of COVID-19, which led to a steeper-than-peers decline in subscriber base as well as average revenue per user (ARPU), said Kotak.

Further, it added that, Vi may require policy respite as well as meaningfully higher tariffs to be in a position to serve its subscriber base without any disruptions as a going concern, it said. It has cut earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates for FY2022-23 by 13 per cent factoring in a lower subscriber base, lower ARPUs and other minor changes. The report further said its analysis of VIL’s cash flows suggested that the current run-rate of EBITDA along with incremental cost savings as per the management guidance and estimated gains from recent tariff changes, may fall short of its annual commitments by $3.1 billion.

Furthermore, Kotak assumes Vi’s AGR instalment of Rs 90 billion, next due in March 2022, given no likelihood of relief on this front, spectrum-related payments of Rs 159 billion, interest cost of Rs 25 billion crore on the non-government borrowings and low run-rate of capital expenditure at Rs 38 billion, for its calculations.