Vodafone Idea shares end 11% lower after Cabinet freezes ₹87,695 crore AGR dues for five years

Shares of Vodafone Idea Ltd. fell are locked in a 15% lower circuit on Wednesday, December 31, after a potential approval to the AGR dues package for the debt-ridden telecom company.

Sources tell CNBC-TV18 that the Union Cabinet has approved a AGR dues package for Vodafone Idea, which is said to include a five year moratorium on AGR payments. The total AGR liability has been frozen at ₹87,695 crore, which means that the amount due in total will not be higher than this one. The moratorium will be for a five-year period.

However, there is still no clarity on whether there will be interest on penalties, or will that be waived off.

According to available details, the payment of the ₹87,695 crore AGR dues will be rescheduled over FY32 to FY41. The frozen dues will be reassessed by the Department of Telecommunications based on audit reports, while AGR dues related to FY18 and FY19 will be payable by Vodafone Idea over the next five years.

The debt-laden company has repeatedly cautioned that its survival hinges on timely funding support, as banks remain reluctant to lend given its stressed balance sheet. Vodafone Idea employs more than 18,000 people and serves close to 198 million subscribers across the country.

A few weeks ago, the Supreme Court allowed the government to undertake a comprehensive reassessment and reconciliation of all dues of the financially stressed telecom company, including interest and penalties, up to FY17. The move was widely seen as a huge relief for Vodafone Idea.

In September, the company had sought a waiver of penalty and interest on an AGR demand of ₹9,450 crore raised by the DoT, arguing that a large portion of the amount related to the pre FY17 period that had already been settled by the apex court in 2020.

Of this demand, ₹2,774 crore pertains to post merger liabilities of Vodafone Idea, while ₹5,675 crore relates to pre merger dues of the Vodafone Group.

The government became the largest shareholder in Vodafone Idea in March this year after converting dues worth ₹36,950 crore into equity, taking its stake to nearly 49%. Earlier, in 2023, the Centre had acquired a 33% stake in the company in lieu of statutory dues exceeding ₹16,000 crore.

Shares of Vodafone Idea ended 11.5% lower on Wednesday at ₹10.67. The stock ended below its FPO price of ₹11 apiece.