Shares of public sector and private banks slumped in early deals on Friday as the Supreme Court dismissed pleas by telecom companies to review its judgement in the adjusted gross revenue (AGR) case. Banks such as State Bank of India (SBI), Yes Bank Ltd and IndusInd Bank Ltd have substantial exposure to the telecom sector and the SC verdict has raised fresh concerns over these lenders’ asset quality.
Shares of SBI lost 2.68% on the Sensex, Yes Bank fell 3.88% and IndusInd Bank dropped 2.52%. IDFC First Bank Ltd slipped 4.44% in the early trade. HDFC Bank Ltd and ICICI Bank Ltd were also down 0.91% and 0.05%, respectively. This dragged BSE Bankex index down 0.84%.
The SC on Thursday rejected the plea of Bharti Airtel Ltd and Vodafone Idea to review its 24 October judgement that had asked them and other telecom operators to pay dues amounting to around ₹92,000 crore in the 14-year-long dispute over the companies’ AGRs.
A three-judge bench of the apex court had defined AGR, as argued by the telecom department, all revenues of a licence holder including those from non-core telecom operations such as rent, dividend and interest income and not just revenues from telecom services. AGR serves as a base for most of the levies including licence fees and spectrum charges which are calculated as a percentage of the figure.
At the Hindustan Times Leadership last month, Aditya Birla Group chairman Kumar Mangalam Birla had said that the group’s telecom unit, Vodafone Idea, will have to “shut shop" if there was no relief from the government following the apex court ruling on AGR. UK-based Vodafone has since written down its investment in the Indian joint venture.
The two telecom companies, along with rival Reliance Jio Infocomm Ltd, raised prices of their services by up to 47% in the first week of December to stop the bleed on their numbers.
Bharti Airtel has to pay ₹35,586 crore to the department of telecommunications by 24 January and Vodafone Idea owes the government ₹50,000 crore.