Additional funding and relief key for Vodafone Idea to meet liabilities

The share price of Vodafone Idea (Vi) rallied 11 per cent in Thursday’s intraday trade and settled 8 per cent higher at ₹11.62 apiece, partially recouping Wednesday’s losses triggered by the Centre’s reported relief plan on its adjusted gross revenue (AGR) dues.

 

The rally in Vi share price came after Vodafone Group and Vi reached an agreement on Wednesday, regarding the settlement on long-pending contingent liabilities tied to the 2017 merger of Vodafone India and Idea Cellular. 

According to the company, Vi is set to receive around ₹5,836 crore under the amended arrangement. Of this, ₹2,307 crore will be received in cash within the next 12 months. The balance (₹3,529 crore) would come from Vodafone Group, setting aside 328 crore of Vi shares to be sold over a 5-year period for Vi’s benefit, the company said in an exchange filing. 

This effectively discharges most of the contingent liability exposure that existed between the promoter group and the company, Vi said. 

On Wednesday, Vi’s stock price had slipped 11 per cent, after hitting a 52-week high of ₹12.80 on December 31, 2025.

 

Separately, the recovery in Vi shares may also be attributed to the telecom company’s clarification that it has not received any communication from the government regarding a 5-year moratorium on its adjusted gross revenue (AGR) dues.

 

On Wednesday, reports suggested that the Union Cabinet has decided to freeze Vi’s AGR dues at ₹87,695 crore, permitting the financially-stressed telco to repay the amount over a 10-year period starting 2031-32. This implies a five-year moratorium for Vi, which was scheduled to begin paying its AGR dues to the government in March 2026.

 

AGR dues pertaining to FY18 and FY19, however, shall be payable over FY26-31 without any change in the schedule, reports added.

 

According to analysts at Emkay Global Financial Services, contrary to the Street’s expectations of at least a 50 per cent waiver, no waiver on the pending dues linked to AGR was, reportedly, provided by the Cabinet.

 

Besides, Vi also has ₹1.2 trillion of deferred payment obligations toward spectrum, with significant scheduled payments between FY26 and FY44. Current operating profit, it said, is insufficient to meet the capex or the spectrum debt repayment requirement.

 

As the company will need additional relief/funding to alleviate such challenges, Emkay Global maintained its ‘Sell’ rating on the stock with a target of ₹6 per share.

 

“Vi’s pre-IndAS116 annualised operating profit is ₹898 crore, which is 6.7 per cent of its spectrum debt with cash balance of ₹3,080 crore as of end-Q2FY26. The management gave guidance for capex spends of ₹7,500-8,000 crore for FY26. With this, leverage remains high even without AGR dues, and the government will need to consider a plan for reducing spectrum debt,” it said.

 

Vi’s valuations at 13.6 times FY27 estimated enterprise value to operating profit, thus, appear expensive, Emkay said.

 

Axis Securities, too, recommended a ‘reduce’ rating on Vi stock, highlighting that the reported AGR relief package is lower-than-expected.

 

“Though the package provides breathing room for capex, the telco’s balance sheet remains bloated,” it said.

 

Those at ICICI Securities, however, said in their note that Vi’s AGR and spectrum annual payment were close to ₹35,000 crore from FY27 onwards. A relief in AGR dues (albeit details/confirmation awaited) will provide annual payout relief of ₹16,000 crore for the next five years.

 

“This provides a breathing space for the company to raise funds and ramp up 5G to reduce subscriber churn and protect/gain market share,” it said.

 

The focus will also shift to average revenue per user (Arpu) hike ahead. Its back of the envelope computation indicates Arpu needs to double for Vi in 5 years for sustained ability to serve the dues thereafter as well as fund capex, the brokerage firm added.

 

Meanwhile, share price of Indus Towers hit a fresh 52-week high of ₹439.70, surging 5 per cent on the BSE in the intraday deal.

 

In the past one month, the stock of the telecom infrastructure company has rallied 11 per cent. It ended the day with gains of 4 per cent and closed at ₹435.8

 

Indus Towers has gained around 60-65 per cent market share of Vi’s new tower rollouts after the latter’s March 2024 fundraises. Indus Towers’ existing tower footprint was constructed for Airtel, and since Vi and Airtel have similar spectrum holdings, this makes Indus best placed to benefit from Vi’s network expansion. Hence, analysts at Ambit Capital expect Indus to continue garnering 60-65 per cent market share of Vi’s incremental rollout.