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Vodafone Idea tanks 9% as SC reserves order on payment timeline

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Shares of Vodafone Idea Ltd slipped 8.85% on Tuesday after the Supreme Court on Monday reserved its order on timeline of staggered payment of adjusted gross revenue (AGR) related dues.

At 12:05 pm, Vodafone Idea fell 7.30% to 8.38 on the BSE, compared to 1.12% rise to 37839.91 in the benchmark index, Sensex.

The apex court expressed doubt over Vodafone Idea’s capacity to clear the dues, asking how it could “rely” on the company for payment over a period given its financial position. The telco has sought 15 years to pay the dues versus 20 years earlier, accepting dues worth  58,254 crore estimated by the telecom department.

“The future for Vodafone Idea looks bleak due to its high leverage and huge cash requirements. A 20/15/10-year grant would result in VIL’s cash outgo of INR51b/ INR59b/ INR75b at 8% interest rate. VIL will need 73% ARPU hike i.e. 85 ARPU increase, in order to service its obligations. Lower payment tenure may put pressure on VIL’s cash flows,” Motilal Oswal Financial Services said in its update.

The apex court reiterated that there is “no room for self-assessment” and telcos have to treat the AGR dues calculated by the DoT as final. However, the government wants that the telcos be granted a timeline for payment of dues to avoid insolvency.

Last week, Vodafone Idea had paid the DoT another 1,000 crore as part of its dues related to AGR, taking the beleaguered telecom operator’s total payments to 7,854 crore.

From the beginning of the year, Vodafone Idea shares fell 36% against a drop of 8% in the Sensex.

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