Vodafone Idea shares plummet 10% after Centre rules out further AGR relief. Should you exit now?

Shares of Vodafone Idea plummeted 10% to their day’s low of Rs 6.66 on the BSE on Tuesday after the government clarified that no additional relief is being considered for the telecom operator with respect to its adjusted gross revenue (AGR) dues.

The statement comes amid ongoing concerns about the company’s financial health and its ability to manage its obligations.

According to previous reports by ET, the Department of Telecommunications (DoT) is not planning any new concessions beyond what has already been extended. Minister of State for Communications Chandra Sekhar Pemmasani stated that the government has already converted a significant portion of Vodafone Idea's dues into equity, and there are currently no discussions or proposals for further changes in this regard.

The government, which became the single-largest shareholder in Vodafone Idea following a Rs 36,950 crore equity conversion in lieu of outstanding spectrum dues from March, had earlier taken a similar step in 2023, acquiring around a 33% stake against dues worth Rs 16,000 crore.

Despite these measures, the company has indicated in court filings that survival without government support remains uncertain.

Vodafone Idea’s AGR liability as of the end of the June 2025 quarter stood at approximately Rs 75,000 crore. The telco, along with peers like Bharti Airtel, BSNL, and MTNL, had challenged the DoT’s AGR definition in the past, but the Supreme Court's October 2019 verdict upheld the department's interpretation and mandated full payment of dues.

The company is expected to begin repaying this liability in six equal instalments after the moratorium ends on March 31, 2026, adding to investor concerns about its cash flow and fundraising plans.

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Separately, the minister also addressed queries on spectrum allocation for satellite communication (satcom) services being considered by global and domestic players, including Starlink and Eutelsat OneWeb, confirming that discussions on pricing are ongoing. He added that satellite firms will be required to host Indian user data domestically and cannot use foreign gateways for service delivery in India.

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With this, the dilemma for the investors arises if they should continue holding the stock or take an exit at these levels.

Here’s what Emkay Global suggests:

Vodafone Idea (VI)’s high leverage stems from AGR dues and spectrum liabilities, which are owed to the government. This has curtailed VI’s ability to invest in network, thereby losing market share and resulting in insufficient EBITDA generation to repay the debt. In effect, government action with respect to the debt timeline and quantum will significantly decide the outcome for VI.

They believe that in the absence of any clarity on this front and considering the precarious financial position, we have a cautious stance on the company.

With this, they have assigned a ‘sell’ rating on the stock, with a target price of Rs 6, stating that a significant debt relief by the government would be the key risk to our hypothesis.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)