Vodafone Idea shares plunge 12% as Supreme Court’s AGR order clouds relief hopes

Shares of Vodafone Idea Ltd (VIL) plunged 12 per cent in Thursday’s trade after the Supreme Court's detailed written order regarding the company's adjusted gross revenue (AGR) plea raised concerns over the potential scope of relief.

Shares of Vodafone Idea slipped on Thursday, falling as much as 12.3 per cent to hit a day’s low of Rs 8.21 on the BSE, against the previous close of Rs 9.37 apiece. At the last check, the stock was trading 10.25 per cent lower at Rs 8.41. The counter has lost 16 per cent over the past three trading sessions.

The pessimism on Thursday stemmed from the Supreme Court’s written judgment, which clarified that its ruling applied solely to Vodafone Idea, given the specific facts and circumstances of the case. The court also noted that the plea was confined to the additional AGR demand of Rs 9,450 crore, CNBC TV18 reported.

The Supreme Court’s order allowing the government to reconsider AGR demands applies solely to Vodafone Idea Ltd and is limited to the additional AGR dues raised for the period up to FY2016-17.

This clarification dampened the optimism seen earlier in the week. On Monday, October 27, Vodafone Idea had informed the stock exchanges of what it termed a positive development. In its filing, the company stated that the Supreme Court has today permitted the Government to consider the grievances of Vodafone Idea on the issues relating to AGR. 

At the time, VIL said it looked "forward to working closely with the Department of Telecommunications to resolve this matter" and called the development an "impetus to the Digital India vision." The company's filing on Monday had noted that the detailed order of the Supreme Court is awaited.

Emkay Global, earlier on October 27, maintained a 'Sell' rating on Vodafone Idea with a price target of Rs 6. The report, which was released after the initial SC hearing, acknowledged the permission for reconsideration improved VIL's "chances of revival" but pointed to the company's deeper financial woes.

Emkay highlighted that VIL's total debt stands at approximately Rs 1.96 trillion, of which only about Rs 0.76 trillion pertains to AGR liabilities. The brokerage warned that "Even excluding AGR dues, VI's debt of ~Rs 1.18trn (largely pertaining to spectrum payment) is high" given its current EBITDA. The firm stated it retains its 'Sell' call "considering the high leverage, high valuations, and lack of clarity on government stance on spectrum debt." 

This contrasts with the view from global brokerage Citi, which earlier described the stock as "high risk" but maintained a 'Buy' rating. Citi had seen the SC's Monday decision as a key trigger of relief for the company. The firm noted the move was positive for both Vodafone Idea and its key vendor, Indus Towers, easing a major sector overhang.