Vodafone Idea, Bharti Infratel shares plunge up to 13%; experts find SC's observations negative for telecom players

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Shares of Vodafone Idea cracked 13.22 percent to Rs 9.39 while those of Bharti Infratel plunged 9.49 percent to Rs 210.85 and Bharti Airtel fell 2.76 percent to Rs 551.60 on June 11 after the Supreme Court adjourned the hearing on the adjusted gross revenue (AGR) case till June 18.

Analysts are of the view that the hopes of relief on AGR front for the telecom operators have been dashed.

"Any hopes that the Supreme Court would reconsider its judgment and reduce the amount of AGR dues for telecom operators appear to have been dashed completely. Even the government's proposal of offering a 20-year window for staggered payments hasn't yet been accepted by the court. It has asked the telcos to present their views on the timeframe to pay the dues and the nature of guarantees," said Ajay Bodke, CEO & Chief Portfolio Manager (PMS), Prabhudas Lilladher.

"Whether the telcos would be comfortable offering personal guarantees of their directors as mentioned by the SC during the course of the hearing is the key. Any denial of personal guarantees may not be looked upon favourably by the court. The directors of telcos are surely in the most unenviable position," Bodke further added.

He highlighted that the SC is clearly miffed with DoT officials for raising gargantuan demands with what it termed as 'ulterior motives' with respect to non-telecom PSUs like Gail, OIL, GNFC and PFC and has initiated action against them.

"It has hinted that there appears to be a concerted attempt at creating panic by issuing notices for recovery of lakhs of crores of rupees against non-telecom PSUs. It does look like a treacherous path for the weak among the telecom operators who might survive but will be in an extremely weakened financial condition ever susceptible to emerging vulnerabilities," Bodke said.

Sameer Kalra, Founder, Target Investing said the Supreme Court's observations are negative for telecom stocks.

"It is negative as they will not get 20 years for sure. Moreover, they need to raise security for payments of the future so that is also a negative. They also have to come out with a clear road map in the next 5 days which is a task," said Kalra.

Pronouncing its order in the AGR case hearing on June 11, the Supreme Court struck down over Rs 4 lakh crore demand against the public sector undertakings (PSUs).

The Supreme Court of India has directed the Department of Telecommunications (DoT) to reconsider demands raised against public sector utilities that amount to over Rs 4 lakh crore.

The Order also directed telcos to file a reply on the roadmap of payment, time to be allowed, securities stating,“Have heard various telcos. Several issues are to be considered such as reasonable time for a staggering payout. We also need to consider some security to ensure that telcos pay the AGR dues. Telcos are directed to file a reply on the roadmap of payment, time to be allowed, and securities.”

The Justice Arun Mishra-led bench of the apex court also sought an undertaking from the telecom companies to secure payment of Rs 1.43 lakh crore in a staggered manner.

Read More: AGR case: SC overturns dues of over Rs 4 lakh crore from PSUs, asks private telcos to provide roadmap for payment

For Bharti Airtel, the AGR dues as per DoT is Rs 35,500 crore whereas it is Rs 13,000 crore as per the company's self-assessment. So far, it has paid Rs 18,800 crore. As per DoT, it still has to pay Rs 17,500 crore.

For Vodafone Idea, DoT claims that the remaining payable is Rs 53,000 crore while the company claims it is Rs 21,500 crore. So far, the company has paid Rs 6,900 crore. As per DoT, it still has to pay Rs 46,100 crore.