Limited AGR ‘relief’ leaves Vodafone Idea in limbo, spooks investors

According to officials familiar with the matter, the cabinet has decided to freeze the struggling telco’s pending adjusted gross revenues (AGR) dues at ₹87,695 crore for five years. The amount can be paid from fiscal year 2032 (FY32) through FY41.

That means the AGR amount will not increase, but it does not also reduce the overall AGR dues of the company, even though the officials said that the recalculation is still on the table and the amount may reduce later. A Supreme Court ruling in October had allowed the government to reassess and recalculate the AGR dues up to FY17.

“The AGR dues frozen as on 31 December shall also be reassessed by DoT (department of telecommunications)," one of the officials cited above said on the condition of anonymity. “The outcome shall be decided by a committee appointed by the government and that shall be binding on both parties."

However, the company will still have to pay AGR dues pertaining to FY18 and FY19—which is over and above the ₹87,695 crore in question—from FY26 through FY31, the official added.

AGR is the revenue base used to calculate licence fees and spectrum usage charges payable to the government.

News of the cabinet’s move shook investor confidence, sending Vi’s stock plunging 11.5% on the National Stock Exchange to ₹10.67 on Wednesday, with no clarity forthcoming on either the overall AGR dues or any relief on interest and penalties pertaining to the dues.

Notably, Vodafone Idea said in an exchange filing on Wednesday that it has not received any communication from the government in relation to the matter. “As and when there is any development which requires disclosure, we will do the needful," the company said.

Queries emailed to DoT and Vodafone Idea did not elicit any response till the press time.

The cabinet’s decision also leaves the company in a lurch as far as raising funds is concerned. The telco had previously warned that it won’t survive FY27 without raising funds, and banks are hesitant to lend without a generous bailout or clarity on the AGR dues.

According to Parag Kar, an independent telecom analyst, any delay in finalising the liability could complicate the company’s ability to raise external funding for much-needed investments, as debt would carry interest obligations while equity infusion requires clear visibility on outstanding liabilities, especially with annual spectrum instalments set to rise sharply from FY27 onwards.

To be sure, if the moratorium on AGR dues had not come in, the company would have had to pay an instalment of approximately ₹18,000 crore due on 31 March 2026.

It will, however, have to pay deferred spectrum liability dues in FY27, which was estimated at ₹5,000 crore in a note dated 24 December by brokerage house Ambit Capital. The brokerage expects the company's cash ebitda at ₹12,100 crore in FY27.

The government owns nearly 49% stake in Vodafone Idea after converting nearly ₹53,083 crore of dues into equity in two tranches in February 2023 and April 2025. Of the roughly ₹2 trillion in total government dues, about ₹1.17 trillion relates to spectrum payments rather than AGR.

In a separate exchange filing on Wednesday, Vodafone Idea said that its promoter group entity Vodafone International Holdings B.V. has entered into an implementation agreement with certain promoter group shareholders to release the pending ₹5,836 crore payment to the company.

As part of the agreement, the company will receive ₹2,307 crore in cash from Vodafone International Holdings over the next 12 months. The remaining ₹3,529 crore is secured through the earmarking of 3.28 billion equity shares of the company by certain Vodafone Group shareholders for a period of five years.

Proceeds from the sale of these shares, at the instructions of a person authorised/ appointed by the company, will accrue to the company, it said.

Earlier in December, Vodafone Idea raised ₹3,300 crore through secured non-convertible debentures, or NCDs, through its subsidiary Vodafone Idea Telecom Infrastructure Ltd, or VITIL. The proceeds will be utilized by VITIL to repay past obligations to Vodafone Idea.

The company had also mentioned during its earnings call that it continues to remain in talks with the banks to raise ₹25,000 crore. However, banks had also sought clarity on the AGR dues before lending to the company, Vodafone Idea had said.