Why did Vodafone Idea slump by more than 20 per cent?

Why did Vodafone Idea slump by more than 20 per cent?

Geyatee Deshpande
/ Categories: Trending, DSIJ News

Vodafone Idea has been in focus soon after the concerns relating to the company’s liquidity issues as well AGR dues came into limelight.

Today, the Supreme Court (SC) pronounced its judgement regarding AGR dues, wherein, it gave telecom companies 10 years to clear the staggered payment.

Vodafone Idea had previously requested for a staggered payment of AGR dues for 15 years from the court. However, SC allowed telecom operators 10 years to pay up dues related to adjusted gross revenue (AGR).

Besides, SC has directed telecom companies to pay 10 per cent of the AGR dues upfront. Telecom companies must also submit the undertaking to pay AGR dues as per the order. Default in payments would invite interest, penalty, along with contempt of court.

The company’s stock crashed after SC allowed 10 years to pay AGR dues, which was expected to be around 15 years. But still, allowing staggered payment is a relief for Vodafone Idea whose survival would have been a concern had the apex court not allowed the staggered payment.

The company still owes more than Rs 58,000 crore to the Centre in AGR dues and analyst strongly believed that granting the requested time of 15 years to pay the dues is the only way to save it as anything less than 15 years would threaten the company’s business.

Vodafone Idea, which faces high liquidity stress, will require high cash flow to continue its business besides paying the AGR dues.

The stock of the company was seen gaining in the recent trading sessions as investors pinned their hopes on a favourable verdict by SC regarding the AGR dues. Investors also seemed to have positive sentiments regarding the company’s ability to survive the current turmoil.

Despite losing subscriber base and the overhang of the AGR sues case, on a YTD basis, the stock has gained by nearly 73 per cent while the stock rose by around 55.34 per cent since June 1, 2020. Continuing its gaining streak and slow recovery, Vodafone Idea has surged by nearly 20.53 per cent in the month of August alone.

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