The third-largest Indian telecom operator, Vodafone Idea (Vi), is having financial difficulties. To prevent bankruptcy, the corporation is striving to settle off the financial firms first before doing anything else. The telco recently paid the State Bank of India (SBI) Rs 2700 crore before the payment was even due. Due to its financial difficulties, Vi may find it challenging to increase network services, launch new goods to the market, and yet be able to pay its debts. Prioritizing debt repayment to creditors is what Vodafone Idea must do, and it is doing so.
According to Indian law, if a corporation fails to make payments to its creditors, the creditors have the authority and right to take the company before the National Company Law Tribunal (NCLT). For those who don’t know, NCLT is India’s sole bankruptcy court. The financial institutions are not even required to offer any warning to do this.
The suppliers who gave the business equipment, technology, and services on credit are unable to do the same thing. The vendors are regarded as operational creditors, according to a report. It takes a lot longer for operational creditors to bring a corporation before the NCLT.
The amount owed by Vodafone Idea to lenders or financial creditors decreased from Rs 23,400 crore in the June quarter of FY22 to Rs 15,080 crore in the quarter ending September 2022, according to the report. Although there haven’t been any concerns about the business being forced into bankruptcy court as of yet, the source claims that Vi’s decision to pay off its financial creditors first is an attempt to avoid having to appear before the NCLT.