How a Positive SC Verdict Turned Sour for Vodafone Idea and Its Investors

A "positive" Supreme Court Order on Vodafone Idea and its Adjusted Gross Revenue (AGR) dues turned bitter on Thursday as investors saw the fine print of the judgment. The telecom company’s shares dropped as much as 12% in early trade today. It was trading down over 7% at 1 AM at ₹8.74 per share.

VI’s larger peers like Bharti Airtel (down 1.71%) and Bharti Hexacom (down 2.32%), and telecom vendor Indus Towers, were also down 3.65%.

The order dated October 27, while allowing the government to re-examine the AGR matter, also restricted the relief to only what VI had sought in the particular case.

"It is further to be noted that the prayer in the petition itself restricts its claim only to the additional AGR demand raised by the respondent for the period up to the Financial Year 2016-17," the apex court’s bench led by Chief Justice B.R. Gavai and Justice K. Vinod Chandran wrote.

SC Order on VI’s AGR Issue

The Aditya Birla Group and Vodafone PLC-promoted company had gone to the Supreme Court in September, claiming that the Department of Telecommunications (DoT) was demanding additional dues from them linked to its AGR liabilities. These liabilities, linked to the company’s spectrum purchases, arose due to a long-standing dispute over what constitutes AGR. The legal battle also involved other telecom companies such as Bharti Airtel and Tata Teleservices. It was concluded in 2020 after an SC decision which upheld the DoT’s definition and imposed thousands of crores in liabilities on telecom companies in pending dues, interest, penalties, and interest on penalties.

For Vodafone, this liability stood at around ₹83,400 crore as of end-March 2025, with repayments scheduled to begin from March 2026. However, earlier this year, the DoT demanded ₹9,450 crore in AGR dues — of which ₹2,774 crore was against the Idea Group and post-merger Vodafone Idea, and ₹6,675 crore against Vodafone Group for the pre-merger period.

Following this, VI approached the court, arguing that these liabilities were already crystallised under the Supreme Court’s 2019 judgment. The case, which lasted just over a month, saw the Centre eventually informing the court that it was working on a final resolution.

Earlier this Monday, the government’s representative Solicitor General Tushar Mehta told the court that since the Union now holds a 49% equity stake in the company, it has agreed to reconsider the reassessment issues raised by Vodafone Idea.

Citing this, the court ordered that "there shall be no impediment in the Union of India reconsidering the issue and taking an appropriate decision in accordance with law."

"We clarify that this is a matter falling within the policy domain of the Union of India and if, in the peculiar facts and circumstances of the case, the Union of India, keeping in view the larger public interest, desires to reconsider the issue, there is no reason to restrain or prevent it from doing so," the order noted.

But just below this clarification, the court said the prayer is restricted in its claim only to the additional AGR demand. This is being read by investors as negative for the sector.

What the Decision Means for VI

Following the October 28 judgment pronouncement, analysts were divided over the implications. In a note on October 28, Motilal Oswal Financial Services said that they "believe any relief would likely be sector-wide rather than limited to VI."

"However, we await further clarity, as the SC observed that GoI’s 49% stake in VI as a key factor in permitting a re-examination of the AGR dues, which could exclude telcos such as Bharti and Hexacom from similar relief," analysts at the brokerage noted.

Analysts at Emkay Global also noted that there is "a low chance of the government reversing the current outstanding ₹37,100 crore AGR dues of Bharti Airtel."

"We note that leverage for VI remains higher even without AGR dues, and the government will need to consider plans toward reducing the spectrum debt as well," they added.

Vodafone Idea’s Total Dues

It has been time and again reported that Vodafone Idea is facing more challenges rather than just massive AGR dues. As of March 31, 2025, Vodafone Idea had payment obligations to the government totalling ₹1,93,970.2 crore, which included deferred spectrum dues of ₹1,18,025 crore and AGR liabilities of ₹75,945.2 crore, as per its FY25 annual report.

"Even excluding AGR dues, VI’s debt of about ₹1.18 trillion (largely pertaining to spectrum payment) is high, considering the current EBITDA. Hence, we expect the GoI to take a holistic view on the solvency of the company and, accordingly, structure the relief," Emkay analysts said.

Adding that while the order improves VI’s chances of revival, "given high leverage, high valuations, and lack of clarity on GoI’s stance on spectrum debt, they keep a sell call for the stock."

For Motilal’s part, they have changed their stance to neutral from sell but said, "any relief for VI would delay (if not completely eliminate) the prospects of a duopoly in the Indian telecom sector and make incremental market share gains from VI more challenging for Bharti and Reliance Jio in the near to medium term."