Bharti Airtel well-positioned but Vodafone Idea in a tough spot post SC ruling on AGR dues

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Updated: Jun 12, 2020 3:12 PM

The research and brokerage firm sees Vodafone Idea is in a tough spot for guarantees and believes lower payment period will increase payment burdens on the company

Bharti Airtel, Vodafone Idea, Bharti Airtel share priceThroughout the session, even when Sensex and Nifty were down over 2 per cent each, Airtel shares managed to hold ground

The Supreme Court on Thursday asked private telecom operators like Bharti Airtel and Vodafone Idea to file affidavits within five days outlining the details as to how they will pay the adjusted gross revenue (AGR) dues. Telecom giant Bharti Airtel was among top BSE Sensex gainers with a growth of 1.6 per cent to trade at Rs 560.90 apiece in an otherwise weak market. Throughout the session, even when BSE Sensex and Nifty 50 were down over 2 per cent each, Bharti Airtel shares managed to hold ground. The bench questioned the Solicitor General over the 20-year time period sought by the telcos to complete the payment. It further asked telcos to file their replies by next Thursday on how much time they want and what kind of securities they can provide. According to ICICI Securities, Bharti Airtel is comfortably placed and can provide bank guarantees as it is already sitting on a huge cash balance.

Vodafone Idea share price gained over 8 per cent to Rs 10.16 after plunging 13.63 per cent from yesterday’s close. The research and brokerage firm sees Vodafone Idea is in a tough spot for guarantees and believes lower payment period will increase payment burdens on the company. It is unlikely to secure any bank guarantee and undertaking from directors. Meanwhile, Motilal Oswal maintains its bullish stance on Bharti Airtel stock with a price target of Rs 710, an upside of over 26 per cent from day’s high. “If the SC grants a payment period of 15 years, as per our estimates, the annual outgo of Bharti Airtel and Vodafone Idea would stand at Rs 3,000 crore and Rs 6,000 crore, respectively,” it said in its latest report. “Given both Bharti Airtel and RJio’s better cash flow positions, the companies could see strong benefit from the potential tariff hikes,” it added.

Mukul Rohatgi, counsel for Vodafone Idea said the total demand of Rs 50,000 crore plus interest and penalty cannot be furnished in bank guarantees. “We do not have enough money to pay our employees and meet our expenses,” Rohtagi added. According to the ICICI Securities, the annual payment for Bharti Airtel and Vodafone Idea in case of amount pending to be payable in five years is Rs 6,500 crore and Rs 12,900 crore; in case of 10 years, it is Rs 3,900 crore and Rs 7,700 crore; and in case of 15 years, it is Rs 3,000 crore and Rs 6,000 crore, respectively. “Anything less than 15 years would significantly curtail the ability of VIL to meet these obligations,” it added.

As per the Department of Telecommunications (DoT), Bharti Airtel’s total dues amount to around Rs 43,980 crore, out of which it has so far paid Rs 18,000 crore. However, Vodafone Idea has been affected the most as the total dues stands at Rs 58,254 crore, of which so far it has paid only Rs 6,854 crore. Similarly, AGR dues on Tata Teleservices amounts to Rs 16,798 crore, out of which the company so far has paid Rs 4,197 crore.

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