Bharti Airtel shares soar to 52-week high on SC AGR ruling; seen gaining from Vodafone Idea loss

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Updated: January 17, 2020 1:50 PM

Bharti Airtel owes Rs 21,682.13 crore as licence fee to the government and Vodafone Idea owes Rs 19,823.71 crore, while Reliance Communications owes Rs 16,456.47 crore.

airtelBharti Airtel seems to be prepared as it has recently raised $3 billion.

The shares of Bharti Airtel rose as high as 6.23 per cent to hit a 52-week high of Rs 503.60 apiece on BSE on Friday after the Supreme Court on Thursday dismissed the review petition filed by the telecom companies against AGR (adjusted gross revenue) verdict. Bharti Airtel stock gained on the hopes that the company may gain a strong market share as rival Vodafone Idea stands to lose more. “Given the adverse situation for Vodafone Idea, RJio and Bharti could gain disproportionately,” Motilal Oswal said in a research note. Bharti Airtel seems to be prepared as it has recently raised $3 billion through a combination of the private placement of shares and an overseas sale of convertible bonds which will be used to repay the AGR liabilities of Rs 35,000 crore.

However, Vodafone Idea is assumed to be worst hit with the apex court’s verdict. Last month, Kumar Mangalam Birla had said, “If we are not getting anything then I think it is the end of the story for Vodafone Idea. It does not make sense to put good money after bad. That would be the end of story for us. We will shut shop.” After this verdict, on Friday the shares of Vodafone Idea tumbled as much as 39.30 per cent to hit an intraday low of Rs 3.66 on BSE.

Department of Telecom had said that Bharti Airtel owed Rs 21,682.13 crore as licence fee to the government and Vodafone Idea owed Rs 19,823.71 crore, while Reliance Communications owed Rs 16,456.47 crore, according to a PTI report. The telcos sought a waiver of interest, penalty and interest on penalty on their AGR payment. The plea was filed Bharti Airtel, Vodafone Idea and Tata teleservices.

“Bharti Airtel’s present net debt stands at Rs 89,000 crore with EBITDA of Rs 40,000 crore in FY21 (net debt to EBITDA of 2.2x). So, incremental Rs 13,000 crore would still keep net debt manageable at Rs 1,02,000 crore with 2.6x net debt to EBITDA,” Motilal Oswal said. “Irrespective of an adverse ruling, Bharti has best-hedged position even if it is required to pay the AGR liability. Assuming subscriber share of 70:30 for RJio and Bharti, both telcos could see EBITDA addition of Rs 24,000 crore and 10,000 crore with 70 per cent margin, implying a jump of 55 per cent and 20 per cent, respectively,” Motilal Oswal said. The brokerage has listed Bharti Airtel as a ‘high conviction idea’ with a ‘buy’ rating with an upside of up to 22 per cent. It has set a target price of Rs 575.

At 1.20 PM, the shares of Bharti Airtel were trading 5.64 per cent up at Rs 500.80 apiece, Vodafone Idea was trading at Rs 4.67, down 22.55 per cent on the BSE in the afternoon session.

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