Vodafone Idea shares faced a severe crash after the Supreme Court’s latest ruling on Adjusted Gross Revenue (AGR) dues. The decision, which dashed hopes of any relief, has sent shockwaves through the telecom industry, especially for Vodafone Idea. Within just an hour of the court’s decision, the company’s market value plummeted by ₹13,500 crore, marking a drastic drop in its stock price by 19%, closing at ₹10.50. This was the company’s largest single-day fall since January 2022. Alongside Vodafone Idea, Indus Towers also saw a significant fall, closing down by 9%.
With Vodafone Idea already under immense financial pressure, the Supreme Court’s ruling has pushed the company deeper into crisis. But what does this mean for investors, and should they consider selling their shares? Let’s break down the situation.
What Are AGR Dues?
The AGR (Adjusted Gross Revenue) issue has been a long-standing dispute between telecom companies and the government. Since 1999, there has been confusion over how telecom companies should calculate their revenue for license fees and spectrum usage charges.
- Telecom companies argued that AGR should include only revenue earned from telecom services like calls, SMS, and data.
- The government, however, wanted to include both telecom and non-telecom income. Non-telecom income includes earnings from interest on bank deposits, rent from properties, or any other sources outside core telecom activities.
This disagreement led to the AGR dispute going to court. In 2019, the Supreme Court ruled in favour of the government, ordering telecom companies to pay their outstanding AGR dues, which include license fees and spectrum charges on their entire revenue.
The Impact of Vodafone Idea
Vodafone Idea is among the most affected by the Supreme Court’s AGR decision, with dues amounting to a staggering ₹70,300 crore. Other companies like Bharti Airtel also face heavy dues, with Airtel owing around ₹36,000 crore. However, Vodafone Idea’s position is far more precarious.
Despite this, the company had pinned its last hopes on a curative petition filed in the Supreme Court. Vodafone Idea and other telecom companies argued that the AGR dues calculation had significant errors and that revising these calculations could drastically reduce the outstanding amounts. But the Supreme Court rejected this petition, dealing a final blow to their hopes.
This ruling means that Vodafone Idea must pay its enormous dues within a 10-year timeframe, placing further strain on an already struggling company. The company faces not only financial challenges but also a loss of customer base and declining market share.
Vodafone Idea’s Stock Performance
Vodafone Idea’s stock has been in a continuous downward trend, with its latest crash following the Supreme Court’s ruling being the most significant in recent years. The company’s stock, which had been trading around ₹13, has now fallen below ₹11, a sharp drop in value. In April, Vodafone Idea raised ₹18,000 crore from investors at a price point similar to its current stock value.
Several analysts had predicted that if the Supreme Court’s decision had been in Vodafone’s favour, the stock could have risen to around ₹15. However, the opposite happened, and the company’s shares dropped significantly.
Goldman Sachs recently issued a concerning report, stating that Vodafone Idea’s cash flow could remain negative until 2031. The report also warned that the stock could fall further, with a target price of ₹2.5, a potential 83% decline from current levels.
Should Investors Sell Vodafone Idea Shares?
The big question now is whether investors should hold on to their shares or sell them to avoid further losses.
Several market experts are advising caution:
- Sachchidanand Uttekar from Tradebulls suggested that Vodafone Idea’s stock has broken the critical ₹13 support level, which means it is likely to fall further. He predicts that the stock could drop to ₹7 in the coming days.
- Jigar Patel from Anand Rathi mentioned that Vodafone Idea’s technical chart looks weak, especially since the stock has fallen below its 200-day moving average. Although the Relative Strength Index (RSI) indicates that the stock is in oversold territory, experts recommend staying away from the stock until the situation improves.
Given the company’s financial struggles, the negative cash flow forecast, and its massive debt burden, the outlook for Vodafone Idea remains bleak. While some investors may choose to wait for a recovery, many market analysts believe that selling now could be a better option to avoid deeper losses.
What Lies Ahead for Vodafone Idea?
Vodafone Idea faces multiple challenges, from a shrinking customer base to heavy financial obligations. The rejection of the curative petition has left the company with limited options. While they have 10 years to clear their AGR dues, the company’s ability to generate sufficient revenue and attract new investors remains in question.
For investors, the current situation is a clear warning sign. Holding on to Vodafone Idea shares could be risky, given the forecast of further price declines. Those with short-term goals may want to consider selling, while long-term investors should be prepared for a turbulent ride.
The telecom sector in India remains competitive, and companies like Reliance Jio and Bharti Airtel are in much stronger positions compared to Vodafone Idea.
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