Setback for Airtel, Vi as SC rejects AGR review plea
What's the story
The Supreme Court has dismissed a plea by telecommunication companies, including Bharti Airtel and Vodafone Idea, requesting a re-computation of adjusted gross revenue (AGR) dues. The companies had filed this curative petition alleging significant errors in the Department of Telecommunication's calculation of their dues. Following the court's decision, Vodafone Idea's stock experienced a significant drop while Bharti Airtel remained flat at the time of writing.
Stock impact
Market reaction and Vodafone Idea's financial crisis
The Supreme Court's decision led to a 10% drop in Vodafone Idea shares, which were locked at the lower circuit of ₹11.61 on the National Stock Exchange (NSE). In contrast, Bharti Airtel shares were up half a percent, trading at ₹1,662 per share on the NSE. Indus Towers also experienced a significant 10% decrease in its stock price following this news.
Plea details
Vodafone Idea's plea and financial implications
In its petition, Vodafone Idea sought three main reliefs: correction of arithmetic and clerical errors in the AGR demand, limiting the penalty to 50% of the shortfall, and revising the interest rate on this penalty to 2% above State Bank of India's prime lending rate. The company had previously warned about its precarious financial situation due to these dues. Vodafone Idea's AGR burden stood at ₹70,320 crore at the end of the FY24.
Market outlook
Market implications and future prospects
The dismissal of the curative petition is expected to worsen Vodafone Idea's cash flow situation, according to IIFL Securities. However, it could potentially benefit Bharti Airtel through possible market share gains. The future of Vodafone Idea's debt-raising plans, crucial for its capital expenditure plans, remains uncertain following this unfavorable verdict from the Supreme Court.