Vodafone in crisis mode

Telecom stocks, as expected are down in the red. Vodafone Idea is a much bigger loser; it is the top loser on the BSE since opening bell. The stock fell 39% to Rs.3.66; it has recovered now to Rs.4.50 levels but remains over 24% down.

The Supreme Court (SC) yesterday evening dismissed the plea of telecom majors, seeking review of certain directions of the apex court on recovery of past dues amounting to Rs 1.47 lakh crore from telecom service providers.

The companies have to pay pending AGR dues to the Department of Telecommunications by January 23. And the amount to be paid is Rs.93,000 crore.

Vodafone owes Rs.44,500 crore and Bharti Rs.34,260 crore in AGR dues.

For Vodafone Idea, this could become an existential crisis as it is already reeling under a massive debt of Rs.1.17 lakh crore. It is in a mode of financial crisis – in Q2FY20 it posted a monumental loss of Rs.50,992 crore as it had made provisions for the AGR dues.  

Bharti Airtel is most certainly impacted as it is also reeling under debt and its loss in Q2 was at Rs.22,830 crore as it has also provided for the AGR. But it is not exactly in the kind of situation that Vodafone is because its recent fund raising moves will give it the liquidity to meet its AGR liabilities. That explains why it is trading in the positive’ from yesterday’s close of Rs.474.05, it opened a bit weaker at Rs.470.10 but soon went on to an intraday high at Rs.498.65.