Vodafone Idea to pay AGR dues to DoT, CLSA maintains sell; share up 18%

CLSA has maintained sell call on the stock and cut target to Rs 3.50 from Rs 5.50 per share.

February 17, 2020 / 10:04 AM IST
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Vodafone Idea share price rose 18 percent in the opening trade on February 17 but erased most gains soon after. The company is likely to make payment for adjusted gross revenue (AGR) to the Department of Telecom (DoT).

It has touched an intraday high of Rs 4.09 and an intraday low of Rs 3.60.

Telecom operators Bharti Airtel, Vodafone Idea and Tata Teleservices are likely to make payment for adjusted gross revenue (AGR) dues on Monday to avoid stringent punitive action from the Telecom Department, according to official sources.

Telecom operators are collectively liable to pay Rs 1.47 lakh crore in AGR dues.

The apex court on Friday came down heavily on the Telecom Department for not taking steps to recover statutory dues, estimated to be around Rs 1.47 lakh crore from operators.


The DoT issued fifth and final notice to telecom operators on February 14 for making payment on the same day, but none of the companies paid the dues.

CLSA has maintained sell call on the stock and cut target to Rs 3.50 from Rs 5.50 per share.

Broking house factor in 50 percent of AGR dues risk in its valuation.

It raises FY20-22 forecasts by 2-4 percent as Q3 revenue & EBITDA are ahead of estimates.

The company has received letters from Department of Telecommunications (DoT) directing immediate payment. The company is currently assessing the amount that it will be able to pay to DoT towards the dues calculated based on AGR (Adjusted Gross Revenue), as interpreted by the Hon'ble Supreme Court in its order dated 24 October 2019. The Company proposes to pay the amount so assessed in the next few days, company said in the press release.

According to Motilal Oswal the Supreme Court order leaves telecom companies with limited options to get relief from legal or government sources.

Could see far-reaching serious ramifications on telecom & banking sectors, said Motilal Oswal.

A duopoly market will likely to benefit Bharti Airtel and raises target to Rs 650 per share.

The incremental EBITDA potential for Bharti Airtel is at Rs 10,000 crore in FY22 and it can garner EBITDA of Rs 55,000 crore in FY22, without factoring any further ARPU increase.

Vodafone Idea’s debt burden is high, while Bharti better placed to make payments as it may continue to gain market share at an accelerated pace, said Axis Capital.

For Vodafone Idea, it’s tough to remain a going concern if there’s no change in order, while there is limited room for any change in decision either by government or any other SC bench, it added.

ICICIdirect believes that given Vodafone’s weak balance sheet and promoters’ earlier statement of their inability to infuse capital, the company is more likely to file for bankruptcy than meet the demand for the dues.

It has suspend the rating on Vodafone Idea, given this development.

It has reiterated that Bharti Airtel remains the preferred pick in the telecom space given its resilient performance amid challenging times with improving market share and relatively stronger balance sheet to weather the challenges.

At 09:32 hrs, Vodafone Idea Limited was quoting at Rs 3.84, up Rs 0.40, or 11.63 percent on the BSE.

(With inputs from PTI)
Moneycontrol News
first published: Feb 17, 2020 09:56 am

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