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News Topical, Digital Desk : Vodafone Idea (Vi) has received significant relief from the Supreme Court. The court has allowed the government to consider recalculating its AGR (Adjusted Gross Revenue) dues. This decision was made considering the government's stake in the company and the interests of its 200 million customers. CLSA has described this as a major turning point for Vi and said that this relief could prove to be a game changer for both the company's funding and share value.
In its report, CLSA stated that this decision could prove to be a significant turning point for Vodafone Idea's fundraising plans. According to CLSA, AGR relief could impact approximately 40% of the company's share value.
CLSA stated that the AGR dispute impacts the company's ₹4.9 per share (approximately 40% of its value). If the government provides relief, it could trigger a significant upside in fair value.
What the Supreme Court said: The Supreme Court stated that the central government may re-examine Vodafone Idea's AGR dues if it wishes. This matter falls within the policy ambit, and therefore, the government has been given complete freedom to decide on it. The court issued this order specifically because the government has made an equity investment (approximately 49%) in the company, and this decision is in the interest of 200 million consumers. AGR stands for Adjusted Gross Revenue, the revenue on which telecom companies are required to pay license fees and spectrum usage charges. Vodafone Idea had challenged the DoT's additional AGR demand of ₹9,500 crore (US$1.1 billion). The company claimed that the DoT had made calculation errors and had re-added some of the amounts already paid. The company's fortunes could change - According to CLSA, Vodafone Idea has outstanding AGR debt of over ₹75,900 crore (US$9 billion). This includes a significant portion of interest and penalties. If the government provides relief, this burden could be significantly reduced, lightening the company's balance sheet. Brokerage firm CLSA says this relief is a "crucial turning point" for the company. AGR relief is crucial for Vodafone Idea's fundraising and operational stability. CLSA also noted that the AGR dispute impacts the company's stake at ₹4.9 per share (approximately 40% of its value). If the government provides relief, it could trigger a significant upside in fair value.
What will the government do now? The government has three options: - Extending the payment period, currently until 2031, can be extended to 2051. - Waiving interest and penalties - A 50% and 100% waiver of interest and penalties can be granted. - Correcting calculation errors - The outstanding amount can be reduced by reviewing old DoT data.
How will Vodafone Idea benefit from this? According to the report, the company's cash flow burden will be reduced. Plans to raise ₹25,000 crore in bank funding will become easier. Debt will be reduced, and the credit profile will improve. Investor confidence will return, and a rise in share value is possible.
Will this relief be available only to Vi, or will it also be applicable to other telecom companies? The Supreme Court's order has been given only in the specific circumstances of this case. That is, it is directly applicable only to Vodafone Idea. However, the court has given complete freedom to the government, so if the government wishes, this relief can be extended to other telecom companies at the policy level.
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