InvestorQ : With Vodafone planning to pay up the AGR charges, does it augur well for the stock?
Riya Dwivedi made post

With Vodafone planning to pay up the AGR charges, does it augur well for the stock?

Answer
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shrinidhi Rajan answered.
4 weeks ago


One thing is certain that Vodafone is now serious about paying the AGR dues to the government since it has a time frame of 10 years for the same. Vodafone Idea has convened its board meeting on 04 September to decide on how to raise funds to pay the AGR.

Among the telcos, the highest liability is on Vodafone which has to pay up close to Rs.58,000 crore to the government towards AGR and spectrum charges overall. With the SC giving 10 years to pay the money, Vodafone has the best change to stave bankruptcy.

One thing that is likely to happen soon is the promoter infusion of funds into Vodafone. In the past, both the promoters of Vodafone idea i.e. Vodafone PLC of UK and the Aditya Birla Group were unwilling to commit fresh funds due to risk of bankruptcy. That will change.

However, there is still a financial catch. Vodafone Idea had reported a net loss of Rs.25,460 crore in the Jun-20 quarter and it is not clear how they will be able to raise the required funds without either diluting equity substantially or enhancing the financial risk.

The bigger challenge is when you look to the future. Vodafone estimates that over the next 10 years it will have to operate at twice the current ARPU or average revenue per user, to be able to raise that kind of money. That would surely put a peg on valuations.