CARE Ratings revise Vodafone Idea’s outlook to ‘Positive’ on AGR relief and capex plan

Credit rating agency CARE Ratings on Friday revised the outlook for Vodafone Idea’s (Vi) long-term banking facilities to ‘Positive’ from ‘Stable’, while maintaining a ‘BBB’ rating for the company’s adjusted gross revenue (AGR), Vodafone Idea said in a statement.The rating agency said the improvement in outlook reflects the improving business outlook for the debt-laden telecom operator, driven by regulatory relief on AGR dues, completion of the CLAM settlement and Vi’s planned capital expenditure of Rs 45,000 crore over the next three years. The revision to a positive outlook comes after the Department of Telecommunications (DoT) announced the AGR relief, which is expected to strengthen Vi’s ability to secure long-term debt and accelerate network investment.

Earlier this month, the Center deferred repayment of Vodafone Idea’s AGR dues by 10 years, freezing about Rs 87,695 crore without any accrual of interest. This move is expected to ease liquidity pressure for the telecom operator in the short term.

However, CARE Ratings warned that Vi’s financial risk profile remains weak, mainly due to its high debt burden resulting from large regulatory liabilities related to spectrum and AGR costs. As of December 31, 2025, Vi’s total bank debt stood at approximately Rs 1,126 crore, while its total spectrum and AGR payables over time were estimated at Rs 1.94 lakh crore.

CARE noted that while the AGR deferment significantly reduces cash outflows in the short to medium term, spectrum-related contributions are likely to rise sharply from FY28 onwards. The company’s ability to meet these obligations will depend on the timely execution of network investments, rate increases and operational leverage-led improvement in cash flows.

As per 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 over the next twelve months and the rest through sale proceeds of shares earmarked for sale of Vi. The agency said an increase in the market value of the earmarked shares would accrue to Vi, increasing the promoter’s contribution to the planned capital investments.

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