Ind-Ra downgrades Voda Idea debt to one notch above junk, 31 MF schemes exposed

On 1 November, India Ratings and Research downgraded non-convertible debentures (NCDs) of Vodafone Idea Ltd worth ₹3,500 crore to BBB from its earlier rating of A+ and placed the NCDs on negative watch. In support of its action, the ratings agency cited an adverse Supreme Court ruling, which would require Vodafone to pay ₹28,000 crore as part of license fees, interest and penalty.

India Ratings also noted the risk in acceleration of bank loan payments by Vodafone Idea and a delay in asset monetization. Mutual funds had an exposure of ₹2,335 crore to Vodafone Idea Ltd (as of 30 September, 2019) according to data from Rupeevest. A downgrade below BBB would bring mutual funds within the purview of the downgrade matrix set out by the Association of Mutual Funds of India (AMFI). The matrix prescribes a 15% write-down for senior secured assets and 25% write-down for subordinated assets companies in the infrastructure segment, which Vodafone Idea is likely to be slotted under. So far there have been no significant dips in Net-Asset Value (NAV) of the schemes holding Vodafone Idea on account of the downgrade.