Why Did Vodafone Idea and Other Telecom Stocks Decline After the SC's Order on AGR Dues?
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Synopsis
Vodafone Idea's stock dropped drastically after the Supreme Court's recent ruling on AGR dues, impacting the telecom sector. Union Minister Scindia confirmed that the government will analyze the implications before making policy decisions. This situation raises significant questions about future performance for Vodafone Idea and its competitors.
Key Takeaways
- Vodafone Idea's shares fell by 12% after the Supreme Court's ruling.
- The court's order pertains only to incremental AGR dues.
- Other telecom stocks were also negatively impacted.
- Government analysis of the order's implications is ongoing.
- Future investor confidence hinges on potential government relief.
New Delhi, Oct 30 (NationPress) Vodafone Idea's stock plummeted by as much as 12 percent on Thursday in response to the Supreme Court's written directive allowing the Centre to reevaluate the telecom company's additional adjusted gross revenue (AGR) obligations.
At 12:03 PM, Vodafone Idea Ltd's shares had rebounded from an intraday low to Rs 8.79, reflecting a decline of 6.09 percent for the day. Earlier, the stock had reached an intra-day low of Rs 8.21.
This situation also had a ripple effect on the broader sector, influencing other telecom firms. Indus Towers and Bharti Airtel saw declines of 3.3 percent and 1.5 percent, respectively, while Bharti Hexacom dropped by 2.71 percent to Rs 1,866 per share.
The court's written ruling on October 29 clarified that the order pertains exclusively to Vodafone Idea and is limited to incremental AGR dues accumulated up to the financial year 2016-17, citing the “peculiar facts and circumstances” surrounding the case.
Previously, on October 27, the apex court had permitted the Centre to reassess Vodafone Idea's AGR dues. The stock had reached a one-year high of Rs 10.57 on October 27, buoyed by hopes for government relief, and had risen 3.5 percent in 2025 to date.
Analysts noted that the Supreme Court's ruling pertains solely to the incremental AGR demand, which is contingent on government policy. They remarked that without significant policy relief, Vodafone Idea's stock is unlikely to see considerable improvement.
On October 29, Union Minister of Communications Jyotiraditya Scindia stated that the government would evaluate the implications of the order and await Vodafone Idea's application for relief before making policy decisions.
The apex court highlighted that the Centre now owns 49 percent equity in Vodafone Idea, and approximately 20 crore customers rely on its telecom services, underscoring the public interest at stake.
Vodafone's recent petition raised a new AGR demand of Rs 9,450 crore from the Department of Telecommunications. The petition argued that a significant portion of this demand relates to the pre-2017 period, which had already been resolved by the Supreme Court.
Point of View
I maintain a neutral perspective on the ongoing developments surrounding Vodafone Idea and the Supreme Court's ruling. While the implications for the company and the telecom sector are significant, it's crucial to await further clarity from government actions and policy decisions before drawing conclusions.
NationPress
01/11/2025
Frequently Asked Questions
What triggered the decline in Vodafone Idea's shares?
The decline was triggered by the Supreme Court's order allowing the Centre to reassess Vodafone Idea's additional AGR dues, leading to uncertainty among investors.
What does the Supreme Court's ruling entail?
The ruling specifies that it applies solely to Vodafone Idea and is restricted to incremental AGR dues incurred up to the financial year 2016-17.
How did this affect other telecom companies?
The ruling negatively impacted other telecom companies, with Indus Towers and Bharti Airtel experiencing declines in their share prices.
What are analysts saying about Vodafone Idea's future?
Analysts believe that without substantial policy relief, Vodafone Idea's stock is unlikely to see significant improvement.
What actions is the government considering following the ruling?
The government plans to analyze the implications of the ruling and await Vodafone Idea's application for relief before making any policy decisions.
