Vodafone Idea shares fell by up to 12% on Thursday after the Supreme Court's written order granted the company limited relief on its AGR dues. The court clarified that the reconsideration would be limited to an additional demand of ₹9,450 crore, with no waiver on interest and penalties, leading to widespread disappointment among investors.
Vodafone Idea: On Thursday, Vodafone Idea shares witnessed a sharp decline of up to 12% as the Supreme Court's written order dampened hopes of relief in the AGR dues case. The court stated that the company could only seek reconsideration on an additional AGR demand of ₹9,450 crore, not on the entire outstanding amount of ₹1.6 lakh crore. Furthermore, the absence of any mention of a waiver on interest and penalties eroded investor confidence, leading to increased selling pressure in the market.
At the beginning of the week, Vodafone Idea shares had seen a b rally. On October 27, the Supreme Court had allowed the government to reconsider the company's Adjusted Gross Revenue (AGR) dues. At that time, investors believed that the company might get relief from its long-standing financial crisis. However, the written order issued on Thursday changed the picture.
The Real Implication of the Supreme Court's Order
The court clarified in its order that the permission for reconsideration would apply only to the limited case of Vodafone Idea. Its scope would be restricted to an additional AGR demand of ₹9,450 crore. This implies that the company will not receive any relief on the remaining outstanding amount of ₹1.6 lakh crore. This was the reason why disappointment replaced optimism in the market.
No Waiver on Interest and Penalties
The biggest hope among investors was that the court would consider waiving interest, penalties, and interest on penalties. If that had happened, the financial pressure on Vodafone Idea could have been significantly reduced. However, the written order made no mention of these aspects. This means that the company will still have to pay these additional amounts. Following the order, investor confidence weakened, and sharp selling was observed in the shares.
Investor Confidence Shaken
Following the court's initial order, Vodafone Idea shares touched a 52-week high of ₹10.52 at the start of the week. Investors had hoped that the company would receive relief in the AGR dispute and its financial position would improve. However, as soon as the limitations of the order's scope became clear, investors quickly began profit-booking. Within two days, the share lost all its gains and fell by up to 12 percent.
The Next Challenge for the Company and Government
The Department of Telecommunications (DoT) had raised an additional AGR demand of ₹9,450 crore on Vodafone Idea. The company claims that approximately ₹5,600 crore of this amount pertains to an older period and does not require payment. Now, the court has also clarified that the reconsideration will be limited solely to this disputed portion.
The government holds approximately a 49 percent stake in Vodafone Idea. It will now be interesting to see what stance the government adopts following this order. Currently, the market sentiment does not appear to be in the company's favor, and investors do not foresee any significant relief in the near future.
