Voda-Idea receives debt rating downgrade

Leading credit rating agency Crisil downgraded its rating for Vodafone Idea's NCD while re-affirming its rating on the company's CP on Thursday. Reacting to this, the stock was experiencing selling pressure in the morning trade on Friday.

CRISIL has downgraded its rating on Rs. 6,000 non-convertible debentures (NCD) of Vodafone Mobile Services Ltd (VMSL) to CRISIL A+ with a negative outlook from CRISIL AA-/Negative, while reaffirming the CRISIL A1+ rating for  Rs 2,000 crore CP programme. The ratings of erstwhile VMSL have been migrated to Vodafone Idea Limited's post the merger of  Vodafone India Limited (VIL) and VMSL with Idea Cellular Limited.

The downgrade in the rating for Vodafone Idea is attributed to intense competition in the Indian telecom sector. The rating agency has stated pricing pressure leading to a low operating performance as the key factor for the rating revision. 

There was a significant decline in operating margin of Voda-Idea at 9.4 per cent in H1FY19 as against 18 per cent in FY18, on a pro-forma basis, thereby weakening the company's debt protection metrics. For the quarter ended September 2018, the average revenue per user (ARPU) per month of Voda-Idea declined to Rs. 88 YoY from Rs 145 and Rs 132 for Vodafone and Idea, respectively. For H1FY19, Voda-Idea posted EBITDA of Rs. 2,349 crore as against Rs 11,908 crore for the full year FY18. 

At 9:50 hours, the stock of Vodafone Idea Limited was quoting Rs. 36.60 per share, down by 3.05 per cent on Friday. The stock opened at Rs. 37.75 per share and dipped to a low of Rs. 36.50 per share.