Shares of debt-ridden telecom operator Vodafone Idea rallied as much as 11% in intra-day trade on Friday after reports that the government may give it some relief on adjusted gross revenue (AGR) dues.
Government Intervention: A potential lifeline
The Department of Telecommunications (DoT) is understood to have written to the Prime Minister’s Office (PMO) informally proposing solutions to ease the cash flows of the cash-strapped telco.
Sources in the know also said the DoT has been asked by the PMO to draw up a fresh formal proposal suggesting ways to resolve the AGR issue for both affected telcos – Vodafone Idea and Bharti Airtel.
“It remains to be seen what formula the DoT can offer in order to help the telcos,” an executive in the know said. Possible solutions could include waiver of some amount of the telcos’ dues, or an extension on the moratorium for payment, or a combination of both.
Airtel’s shares also rose, though the rally was more subdued, hitting an intra-day high of Rs 1,947.90 (up 0.87%), and ending the day’s trading at Rs 1,932.4 (up 0.14%).
Mounting AGR dues have plagued both the telcos since the 2019 judgment passed by the Supreme Court, which upheld the broad definition of AGR as interpreted by the DoT. Since then, Airtel and Vodafone Idea’s AGR debt has ballooned to Rs 43, 980 crore and Rs 83, 400 crore, respectively.
Vodafone Idea had asked for a waiver of Rs 45, 457 crore, while Airtel had appealed for relief to the tune of Rs 34, 745 crore.
In 2021, the government introduced a telecom relief package that allowed affected telcos to avail a moratorium of four years on AGR and spectrum dues payment. The package also allowed telcos to convert part of the dues – including the interest on the deferred installments – into government equity.
Vodafone Idea had chosen both the moratorium of four years, and the option to convert pending dues into equity. As a result, the government now owns a 49% stake in the telco, after it converted Rs 53, 000 crore in dues into equity in two traches over the past few years.
Earlier this year, both Vodafone Idea and Airtel, through separate writ petitions, had appealed to the SC to waive off part of the AGR dues to help alleviate financial pressures arising from the same.
Vodafone Idea had in its petition stressed that if help is not received, it will not be able to continue operations after FY26.
While the apex court dismissed the petitions, it left the door open for the government to help the telcos.
Getting relief or at least some clarity on the AGR front is becoming increasingly crucial for Vodafone Idea, which has been in the market for a Rs 20, 000 crore- Rs 25, 000 crore fundraise as it looks to intensify capex deployment.
It did raise Rs 18, 000 crore from a follow-on- public offer last year, and raised funds from promoters as well, but it still lacks the liquidity to execute its states capex deployment of Rs 50, 000 crore – Rs 55, 000 crore between FY25 and FY27.
For the year ended March 31, the telco deployed Rs 9, 570 crore in capex toward network expansion and 5G launch, though it was slightly short of the Rs 10, 000-crore guidance it gave.
Funding and Future Plans on Hold
For H1FY26, the telco plans to deploy Rs 6, 000 crore in capex, of which it deployed Rs 2, 440 crore in Q1. To maintain intensity of investments, it is now also seeking fundraise from non-banking sources, while banks wait for clarity on the AGR issue before extending more funds to the struggling telco.