'Liability Remains': Why Experts Say Vodafone’s AGR Relief Will Disappoint Market

Market and legal experts reacted with a cautionary note, after sources said that the Union Cabinet has approved a relief package for the debt-laden Vodafone Idea, freezing its Adjusted Gross Revenue (AGR) dues at Rs 87,695 crore, and rescheduling the payment from FY32 to FY41.

The Telecom Department will also reassess the AGR dues frozen based on the Deduction Verification Guidelines and audit reports, the sources added.

In addition, the AGR dues pertaining to FY18 and FY19 (already finalised by the Supreme Court order of 2020) will be payable by Vodafone Idea over FY26 to FY31, without change, the persons privy to the development added. However, there was no formal announcement after the Cabinet meeting.

Market experts expressed caution over the development. SEBI-registered analyst Avinash Gorakshakar spoke to NDTV Profit and said the market is unlikely to view the move positively as the liability continues to remain, despite being backed by funding.

He said, "My sense is that the market will not take this very positively because the liability continues to remain, although it is now backed by funding. Whatever upside the market had seen was based on the expectation that the penalty could be waived by 30–40% and that the company would get a much longer moratorium."

Gorakshakar added that until the management explains the overall structure of the deal and its repayment strategy, the stock is likely to remain negative.

Legal experts also flagged potential challenges. Swapnil Kothari, senior lawyer at the Supreme Court, said, “You waive off a massive amount – tens of thousands of crores – because you have received some stake or based on internal calculations. However, you do not get a five-year moratorium simply because you have a better reputation. Bharti Airtel could also say, ‘You did this for them—why not for us?’"

"If the government does not extend similar relief, it invites litigation. They could approach the Supreme Court under Article 14 of the Constitution, arguing discrimination among service providers operating in the same competitive space," added Kothari.

Kothari also hopes that the taxpayers are not burdened by the moratorium. "When the government grants such a large moratorium on such a significant amount, it ultimately places a burden on taxpayers. With the budget coming up in two months, I hope this doesn’t subtly translate into increased pressure on taxpayers."

Notably, the government holds 49% stake in the debt-ridden telco.

The AGR relief, as indicated by sources, fell short of the market expectations. The stock slumped 20% to hit the lower circuit, but later partially recovered to settle 11.53% lower at Rs 10.67 apiece on the BSE.