Vodafone Idea Share Price: Is there a way out for Vodafone Idea after mounting AGR woes? Balaji Subramanian explains

“If we look at the AGR Responsibility According to the company, the amount is Rs 70 billion. The expectation was that it would be reduced by 50% if the outcome was favourable. Supreme Court “Request for relief. Now, since that has not materialised, my estimate is that the annual payment from next year onwards, assuming the moratorium is lifted as per the original plan, would be around Rs 16,000 crore and that is only on the AGR front,” he says. Balaji Subramanian, IIFL Values.

So my first very simple question for you is: is there any way out for… Vodafone Idea from this?
Balaji Subramanian: Look, I have my doubts now because now the expectation was that the Supreme Court would undo whatever damage it had done, especially on Vodafone Idea. Now, it seems extremely remote that the Supreme Court is going to get any relief because once the corrective petition is dismissed, I don’t really know what other legal recourse is possible. Now, whether the government alone is going to get any relief is also not very clear because frankly, I am not a legal expert and what can potentially constitute contempt of court is something that the government will also be very cautious about. And even if there is some relief in terms of changing the payment schedule etc., that will also not really solve the problem because it will make the payments much higher in the later years, so that’s where it gets a little tricky for Vodafone Idea. And any broad-based relief will also benefit the other two, which are Bharti and Jio. And to that extent, that will also play in their favour. So, I don’t know whether it becomes very difficult to consider some kind of isolated relief targeted only at Vodafone Idea.

He is also not sure that even after implementing the tariff increases, the company will be able to pay the AGR dues that will commence from FY 2026. Also, if you could give us the figure, as per your estimate, what would be the AGR that the company has to pay now from FY 2026 onwards?
Balaji Subramanian: So, if you look at the AGR liability that the company discloses, it is around Rs 70,000 crore. The hope was that it would be reduced by 50% based on a favourable outcome of the Supreme Court’s relief petition. Now, since that has not materialised, my estimate is that the annual payout from next year onwards, assuming the moratorium is lifted as per the original plan, would be around Rs 16,000 crore and that is only on the AGR front.

If you add the spectrum payments as well, the figure goes up to a much higher number. So, the company has given these figures. It would be around Rs 27,000-28,000 crore in FY26. And from FY27 onwards, it would be around Rs 41,000-42,000 crore. So, these are quite high numbers. And a favourable outcome would have reduced these numbers by around Rs 8,000 crore.

The fees they have to pay from fiscal year 2026 and 2027 make it almost impossible for the company to generate that amount of cash flow, is that what you are also suggesting?
Balaji Subramanian: I think it is something that we are all aware of because even with the benefit of tariff hikes, they will have to invest in network deployment and they have planned to spend Rs 50-55 billion over the next three years. So, with all that capex going on, even with the tariff hikes going on and with AGR relief, they would still have had a hard time making these payments. And they would have had to take loans or they would have had to convert some of these dues into equity.
I can see that the last target price you have for Vodafone Idea was Rs 17. But since now Vodafone Idea share prices are below the FPO price, what would you suggest investors to do at this point of time?
Balaji Subramanian: So, I would be a little bit cautious at this point because the relief itself not coming means that it results in a hit of about Rs 5 per share and now I think the key monitorable would be what happens in terms of the debt increase plans Vodafone is concerned that this was already underway and lenders will now start to look at this issue again as cash flow projections would be substantially altered if AGR relief does not come through.