As the Supreme Court dismissed the review plea for relief from the AGR (Adjusted Gross Revenue) verdict filed by the telecom firms on the 16th January 2020, its ripple effect was seen today as share prices of Bharti Infratel went down by 13% and that of Vodafone Idea slipped by 39% in the early trades on the stock market.
Bharti Airtel, and Vodafone Idea are not the only ones who filed a petition seeking relief on penalty and interest of payment, there is a PSU (Public Sector Undertaking) as well which filed a review petition. Indian Railways’ subsidiary, RailTel, is the only PSU to have filed a review petition.
According to Nitin Soni, Fitch Ratings, the dismissal of the review petition must be “a big shock for Vodafone Idea and Kumar Mangalam Birla. The Chairman of Vodafone Idea already said that they would shut shop if they don’t get relief in AGR case”.
Earlier in the week, Bharti Airtel accomplished huge fundraising worth $ 3 billion via Qualified institutional placement (QIP), and Foreign Currency Convertible Bond (FCCB) as the telecom giant is preparing to pay its statutory dues. The company has over Rs. 35,000 crore in dues.
Edelweiss said that it will be easier for Bharti Airtel to gain the market share post repayment of its dues, and will be able to continue to compete with Mukesh Ambani’s Reliance Jio. However, Edelweiss added that we may see a petition for extension on payment date from the telecom firms.
The 15 telecom companies have to pay a total of Rs. 1.47 lakh crore as dues, and after the verdict which said that the companies will have to make the payment for their dues no later than 23rd January 2020.
Citi expected a negative impact on shares of both Bharti Infratel and Vodafone Idea post the Supreme Court’s verdict on the petition.
Talking about Vodafone Idea, the situation is very risky as its liability is more than 2X of its current market capital. The telecom companies still have a legal option left, they can file a curative petition in front of a bigger bench of judges, and can also approach the government requesting extension on repayment deadline, according to Citi.
Credit Suisse, Swiss financial firm, said that for Vodafone Idea the net debt to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) may reach more than 8 times.
All the same, number of non telecom PSUs like DMRC, RailTel, GAIL, and Power Grid has also been affected as the Department of Telecommunications (DoT) has asked them to may payment of their AGC dee dues.
The total dues of these non telecom PSUs have come up to Rs. 4.6 lakh crore, and it is assumed that they will file another review plea as well. At 12:10 pm (1210 hours), Bharti Infratel’s share was floating at Rs. 225.45, down by Rs. 17.45 (7.18%), and that of Vodafone Idea was at Rs. 4.55, down by Rs. 1.45 (24.17%).