Govt may consider partial waiver of Vi's non-principal AGR dues: CLSA

Brokerage says moratorium alone won't get No 3 telco out of the woods

The Centre is likely to consider a partial waiver of interest, penalties and interest on penalties for Vodafone Idea, that make up a bulk of the adjusted gross revenue (AGR) dues, said brokerage CLSA in a note on Thursday, adding that the relief may also include the government expanding a moratorium on AGR payments.

 

Moratorium of AGR payments alone would not be enough for the third largest carrier, the brokerage said, since relief on the entire AGR dues was crucial for the telco’s planned debt fund raise of US$2-2.7 billion.

 

“The government is working on reassessment of Vodafone Idea (VIdea)’s AGR dues and reportedly a relief package will likely be announced by year-end. VIdea’s aggregate AGR dues stood at an estimated ~780bn/US$8.7bn in Q2FY26. We believe the government will likely consider waiver of interest (at least in part) and penalties and interest on penalties that make up a bulk of the AGR dues,” the brokerage said in the note.

 

“In the absence of AGR relief, VIdea could face a financial crisis starting end-FY26/FY27-28 when balance of spectrum and annual AGR payments to the government become due,” it added.

 

“Relief on the long pending AGR issue could provide VI with relief of US $8 billion,” CLSA noted.  

 

The telco has to pay ~16,428 crore as AGR instalment by March 2026, “subject to reconsideration or reassessment of AGR dues including interest and penalty up to FY17 by DoT,” Vodafone Idea had said in September. 

 

Vodafone Idea had opted for a four-year moratorium on deferred spectrum and AGR payments back in 2021, where it had also opted for converting interest on government debt for four years into equity, following which the government held about 24 per cent in the carrier.

 

The debt from the AGR dues reduced to $20 billion. The government converted spectrum auction dues worth ~36,950 crore into equity in March this year, taking its total ownership to 48.9 per cent share in the private telco, making it the single largest shareholder.

 

“With equity raise VIdea has increased capex spend which should arrest market share loss,” CLSA added.

 

Indus Tower’s fortunes are also tied with Vodafone Idea getting relief.

 

“Indus Towers should be a key beneficiary of AGR relief for VIdea as VIdea fundraising and network capex ramps up, boosting Indus Towers’ tenancies,” CLSA pointed out.

 

Vodafone Idea and Bharti Airtel are anchor tenants for Indus’ 226,000 tower portfolio, besides some business from Reliance Jio.

 

“Indus benefits from Bharti’s surging base station footprint, up 85 per cent in three years, and growth should accelerate further with VIdea’s 4G/5G investments ahead,” the brokerage added.