No Taking Blame: Vi Unlikely to File for Bankruptcy, say Execs

Vodafone Idea (Vi) is unlikely to opt form voluntary bankruptcy because such a move may indicate the company was to blame for its operational failure and consequent financial crisis, which was not the case, say senior executives of the Aditya Birla Group.

Executives said the blame for the telco’s the dire situation lies with the regulatory regime and the lack of a “level playing field,” and added that the fate of the company now lay in the hands of the government.

“The group has put in Herculean efforts to get the business on track,” said a top group official who did not want to be named. “Filing for bankruptcy is not an appealing option, considering it was not management error that led to the business failure, nut lack of a level playing field.”

On Thursday, Vi managing director Ravinder Takkar told employees in an internal communication that even after his resignation as non-executive chairman, Kumar Mangalam Birla would continue to provide “support and guidance” the telco. Takkar urged employees to keep their focus on customers and continue winning more markets. He also detailed the changes in the board posts that took place on Wednesday. ET has seen the communication.

ET’s emails to Aditya Birla Group, UK’s Vodafone Group and Vodafone Idea went unanswered.

The carrier faces a potential $3.1 billion (Rs. 23,500 crores) shortfall in cash flows in FY23. The criticality of the carrier’s financial situation came to the fore on June 7, when Birla wrote to the government, offering to hand over his group’s stake in Vi to any public sector or domestic financial entity that could keep the company afloat. Birla said the telco would be driven to an irretrievable point of collapse in the absence of immediate government support.

Contents of that letter were made public on Monday. On Wednesday, Birla resigned his position as non-executive chairman and director of Vi, without citing reasons, and was replaced by Himanshu Kapania.

“The company cannot recover at this stage,” said another top group official preferring to remain anonymous. “Operational profits can’t be made. There are no funds that can be infused further by Aditya Birla Group or Vodafone or investors. Its hands.”

“In most countries, governments step in to save businesses and employment, especially where there is no fraud or malpractice that led to the collapse,” the executive added.

The government has so far not responded to Birla’s letter, with officials privately speaking about difficulties of accepting the proposal.

However, the Centre is working to speedily announce a sectoral relief package, which would benefit Vi too.

The telco’s position has worried lenders, vendors and employees. Recruiters ET spoke to said they have been flooded with resumes of employees who to make swift exits.   S-ET

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