 "Relief for Vodafone Idea may trigger govt equity dilution, say brokerages")
Relief from the government for Vodafone Idea may come well ahead of the March 2026 deadline, which could in turn trigger dilution of government stake in the third-largest telecommunications carrier, analysts at various brokerages said.
The relief, following the Supreme Court’s decision to allow the government to reassess Vodafone Idea’s adjusted gross revenue (AGR) dues, could unlock a fresh equity raise and enable the government to further convert debt to equity, which would “set off a chain of positive developments” for the telco, according to Citi Research.
“With the share price now hovering around the critical ₹10/sh mark, AGR relief could even pave the way for another equity raise down the road. A successful equity raise would dilute the government’s stake below the current 49 per cent, providing the government with the option of converting additional dues into equity,” analysts at Citi Research said in a note on Tuesday.
The relief, which is expected to be provided “in the coming weeks and months”, according to Citi Research, would also give banks the confidence to extend credit required for its capex plans since clarity on relief towards AGR dues from the government had been a key challenge and major obstacle for the company in completing its ₹25,000 crore planned bank funding.
“We reckon AGR relief by the government could provide much-needed confidence to banks to extend credit to the company. This, in turn, would alleviate concerns about the sustainability of Vi’s network capex, which have arisen due to recent delays in securing bank debt,” the analysts added.
They suggested that the relief could be in the form of a partial waiver of dues, going up to 50 per cent of the amount due towards penalty and interest on penalty, or extension of timeline for payment of the dues from six years to 20 years, or a combination of both, which would reduce the annual AGR repayments to comfortable levels for the company to service. The company is required to begin annual payments of ₹18,000 crore from March 2026.
“AGR relief could, therefore, in our view, trigger a series of positive events for Vi, which, in turn, could ultimately provide necessary comfort to Indus’ management to reinstate dividends,” they added.
Analysts at Emkay Global expect the government to take a ‘holistic view on the solvency of the company’ and, accordingly, structure the relief since only ₹76,000 crore of Vi’s total debt of ₹1.96 trillion was AGR related, while the majority ₹1.18 trillion largely pertained to spectrum payments.
“We note that leverage for Vi remains higher even without AGR dues, and the government will need to consider plans toward reducing the spectrum debt as well,” the brokerage said in a report on Tuesday.
It added that since the decision was specifically pertaining to Vi, considering the peculiar conditions of the company, they expect a low chance of the government reversing the current outstanding ₹37,100 crore AGR dues of Bharti Airtel.
The brokerages’ views came after the SC allowed the Centre to reassess Vi’s AGR dues, holding that any relief to the struggling telecom operator lay within the Union government’s policy domain. The decision came on Vi’s petition against DT that sought for quashing of additional demand of ₹9,450 crore raised by the Centre, of which ₹5,606 crore related to the period till 2016-17. Vi had sought for a comprehensive reassessment of its AGR dues for periods up to 2016-17, as well as a recalculation of liabilities. It had also sought a waiver of interest and penalties on the grounds that several components of the dues were not finalised. T