Vodafone Idea shares plunge 12% amid fresh uncertainties in AGR relief

The Supreme Court's order to the government to reconsider the adjusted gross revenue demands is limited only to Vodafone Idea's additional dues

Vodafone Idea share price today

 

Vodafone Idea shares plunged over 12 per cent on the BSE in Thursday’s intraday trade as the fine print of the Supreme Court’s latest verdict in the AGR case triggered panic among investors. 

 

AGR stands for Adjusted Gross Revenue. 

 

At 10:20 AM, Vodafone Idea share price was quoting 10.89 per cent lower at ₹8.35 per cent, having dropped 12.4 per cent intraday to ₹8.21 per share. By comparison, the BSE Sensex index was down 333 points (0.40 per cent) at the same time. 

 

Why are Vodafone Idea shares falling today?

Shares of telecom services provider Vodafone Idea came under heavy selling pressure today after a copy of the Supreme Court’s latest verdict in the AGR dues case revealed that the apex court’s order to the government to reconsider the adjusted gross revenue demands is limited only to Vodafone Idea’s additional dues, raised for the period up to FY2016-17. 

 

 

This, effectively, restricts the AGR relief to ₹9,450 crore.

 

The order, the SC stated, has been taken considering the “peculiar facts and circumstances” of the case, including the Union government’s 49 per cent equity stake in the telecom operator.  ALSO READ | BHEL shares up 3% amid heavy volume on strong Q2 show; time to buy or hold?

Vodafone Idea stock: Buy or sell?

As per reports, IIFL Securities said the written copy of the Supreme Court's order in Vodafone Idea’s AGR case has created uncertainties as to whether the relief is restricted to Vodafone Idea's additional AGR demand of ₹9,450 crore or on the original AGR liability of ₹80,000 crore.

 

“Going ahead, there can be two outcomes -- one is that the SC merely makes a statement of the fact that the petition pertained to additional AGR demand. The government has the flexibility to work on the entire AGR amount. The other interpretation is that SC's grant of flexibility is limited only to the additional AGR demand," the brokerage said, adding that shares of Vodafone Idea and Indus Towers may remain weak till there is some clarity on the order.

 

However, in the absence of a clear directive, we believe that the government may be reluctant to act with complete flexibility, fearing contempt of court proceedings, it cautioned. 

 

Notably, analysts at Emkay Global, in their October 27 note, had maintained their ‘Sell’ rating on the stock considering the telco’s huge debt obligation.

 

“While the SC’s order gave the Government of India enough wiggle room to create a plan for Vi’s

long-term sustainability, we note that leverage for Vodafone Idea remains higher even without AGR

dues, and the government will need to consider plans toward reducing the spectrum debt as well,” it said.

 

It observed that only ₹0.76 trillion of Vodafone Idea’s total debt of nearly ₹1.96 trillion pertains to AGR liabilities. Even excluding AGR dues, Vi’s debt of ~₹1.18 trillion (largely pertaining to spectrum payment) is high, considering the current Ebitda (₹9,200 crore in FY25, excluding IndAS-116 impact). 

 

While the permission by the SC improves Vi’s chances of revival, given high leverage, high valuations, and lack of clarity on GoI stance on spectrum debt, the brokerage retained its ‘Sell’ rating on Voda Idea stock with a target price of ₹6.