Tue Jan 21 13:08:26 UTC 2025: **Government’s Potential AGR Waiver to Boost Telecom Sector**

NEW DELHI – IIFL Securities predicts a significant positive impact on the Indian telecom sector following a potential government partial waiver of Adjusted Gross Revenue (AGR) dues. The brokerage firm estimates that Bharti Airtel and Vodafone Idea (VIL) could see their liabilities reduced by ₹38,000 crore and ₹52,000 crore, respectively. This relief, potentially announced in the upcoming Union Budget on February 1st, could result in per-share upside of ₹62 for Bharti Airtel, ₹7 for VIL, and ₹29 for Bharti Hexacom.

While the waiver, coupled with a recent bank guarantee waiver, improves Vodafone Idea’s prospects for a ₹25,000 crore debt raise and its planned capex program, IIFL Securities cautions that VIL will still face significant cash flow challenges in the coming years. The brokerage firm believes the government is likely to convert a portion of VIL’s dues into equity. Based on these projections, IIFL estimates a fair value of ₹10 per share for Vodafone Idea by March 2026.

The report acknowledges that even with the AGR relief, Vodafone Idea’s free cash flow will likely be insufficient to meet its obligations. IIFL projects a cumulative cash deficit of ₹40,600 crore by the end of FY27, necessitating further debt or equity raising, or government equity conversion. The brokerage remains positive on Bharti Airtel, Indus Towers, and Bharti Hexacom. IIFL doesn’t foresee the waiver impacting future tariff hikes, emphasizing the need for significant revenue growth to ensure VIL’s long-term financial health. The firm anticipates another round of tariff hikes in late 2025.

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