Did the market misread Vodafone Idea’s AGR relief?

Vodafone Idea

Shares of Vodafone Idea Ltd fell sharply on December 30, correcting nearly 11 percent, even as the government cleared a long-awaited relief framework on adjusted gross revenue (AGR) dues.

The sell-off has puzzled many investors, particularly because the relief was broadly on expected lines and it follows a recent Supreme Court (SC) order that allows the government to reassess disputed AGR liabilities.

Market participants, however, say the reaction reflects a gap between expectations and the fine print of the announcement rather than a reversal of the company’s underlying relief prospects.

The cabinet, on December 31 , approved the freezing of Vodafone Idea's AGR dues worth Rs 87,695 crore, whose payment is now being rescheduled to FY32-FY41. However, AGR dues of FY18 and FY19 shall be payable by the company over the next five years.

After the December 31 crash, Vodafone Idea shares saw a recovery of more than 7.6 percent on January 1, trading at Rs 11.58 apiece on the BSE at 12.20 PM

Also Read: Vodafone Idea shares rise 9% as telco to get Rs 5,836 crore from Vodafone Group

Relief largely procedural for now

The cabinet decision does not immediately reduce Vodafone Idea’s headline AGR dues of about Rs 87,000 crore. Instead, it puts in place a mechanism for reassessment through an audit-led process, with the company allowed to present its arguments before a government-appointed panel.

This outcome was largely anticipated by the Street. What appears to have triggered the sell-off is that the government stopped short of announcing a revised AGR number or offering an outright waiver on interest and penalties, something sections of the market may have been hoping for after the stock’s sharp run-up in recent weeks.

Instead, the announcement effectively provides a moratorium-like relief on the full amount due, without altering the headline liability, for now.

To be sure, if the moratorium was not provided then, the telco would have to pay approximately Rs 18,000 crore of dues on March 31.

Supreme Court order

The relief framework draws its legitimacy from a recent SC order, which allowed the Government of India to reassess AGR dues through a structured mechanism. The top court’s nod is significant, as it gives the government legal and procedural cover to revisit past calculations without inviting allegations of arbitrariness.

People familiar with the matter said a committee has been proposed to determine the appropriate quantum of relief. The panel is expected to conduct a detailed audit of Vodafone Idea’s AGR liabilities and arrive at what it considers the correct amount payable. This audit-based route could potentially pave the way for further concessions beyond those already extended, including a reassessment of disputed revenue components that inflated the original AGR demand.

The committee is likely to submit its report within a month or two, following which a formal relief package could be announced.

So why did the stock fall?

Market participants point to multiple reasons behind the sharp correction.

First, the stock had already rallied sharply ahead of the decision, pricing in a more immediate and quantifiable reduction in AGR dues. When the reassessed number was not announced alongside the cabinet decision, investors reacted with a knee-jerk sell-off.

Second, some investors appear to have expected a direct waiver or write-down of interest and penalty components, which together form a substantial part of Vodafone Idea’s AGR burden. The announcement on did not address this explicitly, focusing instead on process rather than quantum.

Third, the relief—while meaningful—will take time to translate into numbers. The audit-led reassessment is not an overnight exercise, and any material reduction in dues will only come after the committee submits its findings and the government takes a final call.

The company still has to pay AGR dues for FY18 and FY19 over the next five years, another factor that likely disappointed investors.

Relief still in play

Despite the market’s initial reaction, analysts argue that the long-term significance of the decision should not be underestimated. The formalisation of a reassessment mechanism, backed by the SC, materially improves Vodafone Idea’s chances of securing deeper relief over time.

For a company battling high leverage, weak cash flows and intense competition, even incremental reductions in AGR dues can materially alter its survival trajectory.

Given that the government of India is the largest shareholder of the telco after converting dues worth Rs 36,950 crore into equity, taking its stake to nearly 49 percent, market participants expect that any final assessed AGR dues amount will be significant in nature to ensure the continuity of its business.

Earlier, in 2023, the Centre had picked up a 33 percent stake in lieu of statutory dues exceeding Rs 16,000 crore.

Vodafone Idea’s government liabilities stood at approximately Rs 2.01 lakh crore at the end of Q2 FY26, as per ICICI Securities, including both AGR and spectrum-related dues, making an effective relief package important both for the telco and its biggest shareholder - the government.