Vodafone Idea shares remain a 'high risk buy' for Citi despite potential relief on the AGR dues

Global brokerage firm Citi has maintained a 'High risk buy' rating on Vodafone Idea Ltd. with a price target of ₹10, after the Supreme Court said the government can reconsider the telecom operator's grievances related to adjusted gross revenue (AGR) dues.

Citi said the apex court's order "has permitted the Government of India to consider grievances of the company on issues relating to AGR," adding that this could have "significant positive ramifications for Vodafone Idea and, by extension, for Indus Towers."

The brokerage expects that with a large lump-sum AGR payment due in March 2026, any relief is likely to come "well ahead of this deadline, in the coming weeks and months."

For Indus Towers, Citi has retained its 'Buy' rating with a price target of ₹460.

AGR relief could trigger series of positive events

Citi reckons that AGR relief by the government could provide much-needed confidence to banks to extend credit to the company. This, in turn, would help alleviate concerns about the sustainability of Vodafone Idea's network capex, which have arisen due to recent delays in securing bank debt.

Additionally, with the share price now hovering around the critical ₹10 mark, AGR relief could pave the way for another equity raise down the line. A successful equity raise would dilute the government's stake below the current 49%, giving it the option to convert additional dues into equity.

According to the brokerage, AGR relief could therefore trigger a series of positive developments for Vodafone Idea, which, in turn, could provide comfort to Indus Towers' reinstated dividends.

Vodafone Idea shares surged nearly 10% on Monday (October 27) after the SC said it saw no reason why the Centre cannot reconsider the issue of additional AGR dues, for which the telecom operator had approached the apex court.

The court clarified that the order was applicable only in the "peculiar facts and circumstances" of this case, given the government's 49% equity stake and 20 crore subscribers.

What options does the govt have?

Analysts see multiple routes the government could explore to support Vodafone Idea:

- Extending the repayment timeline for AGR dues (currently ending March 2031).

- Waiving 50% of interest and 100% of penalty and interest on penalties.

- Rectifying earlier calculation errors.

Solicitor General Tushar Mehta, appearing for the Centre, said the government would not recompute the AGR dues, but would propose a solution, subject to SC approval.

Why any relief matters

Analysts say any potential relief on the AGR front could ease Vodafone Idea's cash-flow pressure and help it raise up to ₹25,000 crore in bank debt.

The company had earlier raised ₹18,000 crore through India's largest follow-on public offer (FPO) and received an additional ₹2,000 crore infusion from promoters in 2024.

However, it remains unclear whether similar relief could be sought by other telecom incumbents.

Shares of Vodafone Idea ended 4.16% higher at ₹10.02, after hitting an intraday high of ₹10.57, its highest level since September 2024 and close to its FPO price of ₹11 per share.