In a notable divergence from the broader market trend, shares of telecom operator Vodafone Idea surged more than 4% during early trading on Wednesday. The stock extended its gains for a second consecutive session, highlighting investor optimism surrounding potential government relief for the beleaguered company.
Market Rally Defies Broader Sell-Off
While Indian equity markets witnessed a sell-off, Vodafone Idea's stock price climbed as much as 4.24% to ₹10.57 per share on the Bombay Stock Exchange (BSE). By 10:25 AM, the scrip was still trading firmly in the green, up 2.76% at ₹10.42. This upward movement comes amidst growing anticipation that the Union Government is moving closer to finalizing its stance on the telecom firm's proposal for relief related to its massive Adjusted Gross Revenue (AGR) dues.
Government Awaits Formal Request, Scindia Cites Legal Boundaries
Union Telecom Minister Jyotiraditya Scindia provided a crucial update, stating that the Centre is awaiting a formal request from Vodafone Idea before proceeding with any relief measures. In an interview with CNBC-TV18, Scindia emphasized that the ministry is carefully examining the legal boundaries established by the Supreme Court in its verdict last month.
"Judgment needs to be evaluated from a point of view of what can be done and what cannot be done. We cannot cross the border of the SC judgment," the Minister told the news channel. This comment underscores the government's cautious approach, bound by the apex court's directives.
The Massive AGR Dues Overhang
The backdrop to this development is Vodafone Idea's staggering financial liability. The company's overall AGR dues are pegged at a colossal ₹83,400 crore. Furthermore, annual payments of ₹18,000 crore are due starting March. When penalties and interest are included, the telco's total estimated liabilities to the government balloon to approximately ₹2 lakh crore. Vodafone Idea has repeatedly stated that its current cash flows are utterly insufficient to meet these obligations.
In a significant ruling last month, the Supreme Court allowed the government to comprehensively reassess and reconcile all of Vodafone Idea's AGR dues, including interest and penalties, up to the financial year 2016-17 (FY17). Building on this, the company sought a waiver of penalty and interest on an AGR demand of ₹9,450 crore raised by the Department of Telecommunications (DoT) in September. It argued that a major portion relates to the pre-FY17 period, which was already settled by the Supreme Court in 2020.
Impressive Share Price Performance
Despite its well-documented financial stress, Vodafone Idea's stock has been a stellar performer on the bourses recently. The share price has rallied 9% in one month and has skyrocketed by 58% over three months. On a year-to-date (YTD) basis, the telecom stock has gained 30%, while it has risen 26% in the past year. Even over a three-year horizon, the share price has appreciated by 25%.
The market's positive reaction today signals hope that a resolution, within the framework of the Supreme Court's order, could provide Vodafone Idea with much-needed breathing room to survive and compete in the crucial Indian telecom market.
