AGR Relief For Vodafone Idea Could Unlock Bank Funding, Boost Indus Towers: Citi

The Supreme Court permitted the Government to consider the grievances of Vodafone Idea Ltd. on the issues relating to AGR, “we believe this could have significant positive ramifications for Voda Idea and, by extension, for Indus Towers,” Citi said on Tuesday.

The brokerage further added that, with a large lumpsum amount towards AGR dues coming up for payment by VI to the government in Mar 26, “we believe that relief from the government should be forthcoming well ahead of this deadline-le, in the coming weeks and months. We reiterate our ‘Buy’ rating on Indus with target price of Rs460 and maintain a ‘Buy’/High Risk rating on Voda Idea.

Citi also noted that AGR relief could trigger series of positive events including clarity on relief towards AGR dues from the government which has been a key challenge and major obstacle for VI in completing its Rs 250 billion planned bank funding.

“We reckon AGR relief by the government could provide much-needed confidence to banks to extend credit to the company. This, in turn, would alleviate concerns about the sustainability of VI's network capex, which have arisen due to recent delays in securing bank debt,” the brokerage said.

Additionally, with the share price now hovering around the critical Rs10 per share mark, AGR relief could even pave the way for another equity raise down the road. A successful equity raise would dilute the government's stake below the current 49%, providing the government with the option of converting additional dues into equity, the brokerage noted.

“AGR relief could therefore, in our view, trigger a series of positive events for VI, which, in turn, could ultimately provide necessary comfort to Indus's management to reinstate dividends,” it said