Supreme Court dismisses telecom companies’ plea over AGR dues owed to government
India’s Supreme Court on Thursday rejected a plea by telecom companies seeking recalculation of debts they owe to the government, sending the stock prices of debt-ridden Vodafone Idea and its peers plummeting.
Analysts at ICRA estimate that Vodafone Idea and Bharti Airtel owe Rs 1 trillion ($12 billion) in arrears, including spectrum charges and license fees. However, they did not shed light on the amount owed by other companies.
The companies had filed a petition in a last resort against a similar Supreme Court ruling in 2021, alleging that the telecom department had made errors in calculating the so-called adjusted gross turnover (AGR) dues.
Telecom companies have long believed that only revenues from core activities should be taken into account when calculating contributions. The government, on the other hand, stated that AGR should also include revenues from other activities, such as rent or land sales.
The Supreme Court ruled in 2019 in favor of the government definition for AGR calculations.
The latest ruling comes as a setback for Vodafone Idea, which owes around Rs 700 billion in licence fees and spectrum charges to the government, according to its latest quarterly report.
The Indian government is also one of the largest shareholders in the company with a 23.1% stake.
Analysts did not expect the ruling to have a major impact on Bharti Airtel due to the company’s stronger financial position.
Shares of Vodafone Idea fell around 20% on the news, while Bharti Airtel briefly turned negative but closed 0.6% higher.
“A positive ruling would have reduced Vodafone’s debt by Rs 350 billion,” said Balaji Subramanian, research analyst at IIFL Securities.
The ruling will make it difficult for Vodafone to finance its Rs 250 billion debt as lower cash flow would make banks less likely to expose themselves to the company, he said.
“If aid had come, their annual cash flow would have increased by 80 billion rupees.”
Vodafone Idea and Bharti Airtel did not immediately respond to Reuters’ requests for comment.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
