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Voda Idea, Bharti Infratel shares may dive as SC rejects AGR pleas

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Mumbai: Shares of Vodafone Idea and Bharti Infratel could drop sharply on Friday after the Supreme Court on Thursday rejected the plea of telecom companies for a review of its earlier order that allowed the government to collect dues worth Rs 1.47 lakh crore from them. Analysts believe that Bharti Airtel could escape with moderate declines since the company is in a position to pay the adjusted gross revenue (AGR) dues.

Shares of nontelecom companies that have been asked to pay up could also decline when trading begins Friday. “Typically, Supreme Court decisions for review are in sync with the main judgement.

So, we are not surprised with the judgement.

This decision is more negative for Vodafone and Bharti Infratel as Bharti Airtel has enough money to sustain,” said Abhimanyu Sofat, head of research, IIFL Securities.

“What happens to non-telecom players will be more interesting to watch as any payment from them on account of AGR is not discounted by the market.” On Thursday, Bharti Airtel’s stock rose 1.35 per cent to Rs 474 while Vodafone gained half a percent to Rs 6.03.

Bharti Infratel declined 1.8 per cent to Rs 242.85. Among the non-telecom companies facing AGR liabilities are Power Grid Corp, GAIL, and Oil India. Bharti Airtel’s current net-debtto-Ebitda is 3.3 times, while that of Vodafone is 24x.

With the AGR payments, Bharti Airtel’s debt could increase to Rs 1,22,400 crore, with netdebt-to-Ebitda of 4.2x.

Vodafone’s debt could rise to Rs 1,46,100 crore with net-debt-to-Ebitda of 35x.

Further, a two-year moratorium and EMI-driven repayment could require Rs 7,100 crore and Rs 9,100 crore cash outgo for Bharti Airtel and Vodafone, respectively, from FY23. “For Vodafone, AGR liability of Rs 44,200 crore remains unresolved with limited cash flows or fund raising possibilities, while Bharti has already launched QIP/FCCBs to raise $3 billion to pay its AGR liability, which would merely dilute 5 per cent equity and contain its net debt to Rs 1,08,000 crore, even if it is required to pay the complete portion of AGR liability,” said Aliasgar Shakir, analyst, Motilal Oswal. Despite the tariff increase, Vodafone’s free cash flow (FCF) after capex and interest cost of Rs 18,000 crore could still be negative at Rs 6,000 crore in FY21, according to analysts’ estimates.

Bharti’s FCF is expected to increase to Rs 11,600 crore in FY21E from negative Rs 14,300 crore in FY19.




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