Vodafone Idea tanked 4% after a report said that Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) have decided to curtail their borrowing calls and have demanded additional collateral from the telco.

What Happened: PFC and REC have rejected Vodafone Idea’s request for a long-term loan, citing a mismatch with their internal underwriting guidelines, according to a report by The Economic Times. There is also discomfort regarding the collateral securities offered by the cash-strapped telecom company, the report added.

Both the government lenders, specialising in power-related projects, have reportedly told Vodafone Idea (Vi) that any loan proposals will require additional collateral in the form of corporate guarantees. This measure is intended to protect against potential defaults on these commitments, ET reported, citing top financial industry people involved in the discussions.

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In a letter to Vodafone Idea CEO Akshaya Moondra last month, REC reportedly stated that it could not proceed with the financing due to constraints related to the company's internal policies, guidelines and established procedures.

Additionally, PFC, which is REC’s parent company, also evaluated the loan proposal and declined to proceed, the report said. REC chairman Vivek Kumar Dewangan has reportedly confirmed its inability to consider Vi’s loan proposal. 

This comes amid the telecom company’s precarious financial situation, characterised by a massive debt pile and dwindling revenues, which has raised concerns about its ability to repay loans.

Vodafone Idea is looking to raise funds to strengthen its balance sheet and invest in network upgrades to compete with rivals like Reliance Jio and Bharti Airtel. The latest development could further strain the company’s already stretched finances.

Price Action: Shares of Vodafone Idea plunged 4.06% to ₹7.8 on Friday morning.

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