The benchmark Sensex on Friday plunged nearly 500 points intra-day on heavy losses in bank stocks and Vodafone Idea, after the Supreme Court asked telecom companies to deposit their Adjusted Gross Revenue (AGR) dues by March 17.
After a strong opening, the Sensex closed 202 points lower at 41,257.74 in a volatile session, while the NSE’s Nifty50 closed 0.50 per cent, or 61.20 points, lower at 12,113.45 points. Vodafone Idea reversed gains and plunged 23.21 per cent at Rs 3.44, following the order.
According to analysts, banks are expected to take a big haircut if Vodafone Idea, which has over Rs 1-lakh crore debt, collapses without making debt repayment. SBI shares fell 2.41 per cent at Rs 319.55, PNB by 2.25 per cent at Rs 54.20 and Union Bank 1.96 per cent at Rs 47.60.
Of SBI’s exposure to the telecom sector, Rs 9,168 crore have already become non-performing assets (NPAs). The prospects for the telecom exposure of banks becoming NPAs will hit banks hard at a time when they are trying to come out of the NPA mess. However, Vodafone’s rival Bharti Airtel hit an all-time high (intra-day) of Rs 567.40 on the BSE, and closed 4.65 per cent higher at Rs 565.10 on rising prospects of duopoly in the telecom sector.
The order directing the telecom companies to settle the pending AGR dues by March 17 will put further uncertainty on their operational sustainability, particularly that of Vodafone Idea. The latter’s ability to pay an amount of over Rs 53,039 crore by the stipulated date is uncertain, given its current financial inflexibility.
Vinod Nair, head of research, Geojit Financial Services, said: “The SC ruling on telecom players instructing them to pay dues by March 17 will impact the asset quality of banks having decent exposure in the sector. Banks’ stocks will be under pressure given high inflation and the RBI being unlikely to cut rates in the near term. Indian market is impacted due to fall in global market due to increase in coronavirus cases.”
“The market plunged sharply after the Supreme Court rejected the plea of telecom players — Vodafone Idea and Bharti Airtel — seeking a new schedule of AGR payments,” said Ajit Mishra, VP-research, Religare Broking.
Analysts said the SC order directing the telecom companies to settle the pending AGR dues by March 17, 2020 will put further uncertainty on their operational sustainability, particularly that of Vodafone Idea. “The latter’s ability to pay an amount of over Rs 55,000 crore by the stipulated date is uncertain given its current financial flexibility. While Airtel needs to pay an amount of Rs 35,500 crore, they have been able to raise funds in the recent past,” said Suman Chowdhury, president, Acuite Ratings & Research.
According to telecom experts, telecom tariffs are also expected to rise further by at least 20-25 per cent in the near to medium term to support the payments of such large dues to the Department of Telecommunications.
Vodafone Idea postponed its post-earnings conference call with analysts, which was earlier scheduled for Friday.
Vodafone Idea, hit by AGR dues and finance costs, reported a net loss of Rs 6,438 crore for the December 2019 quarter, as against a Rs 5,004-crore loss in the same period a year ago. “Vodafone India faces uncertainties which can have a significant impact on its business and valuation outlook. Its net debt is more than five times its market cap and the company faces Rs 53,000 crore payment as a result of the SC’s adverse decision on the AGR issue. It also lags in network investments and faces a difficult task of defending its market share which continues to erode every quarter,” BNP Paribas said in a report.
Meanwhile, the telecom department has deferred the last date to March 6, 2020 for selection of auctioneer to pick software developer for the proposed Rs 5.22 lakh crore spectrum auction. This is the second time that the Centre has shifted the last date. Financial bids of qualified firms will open on February 28 and the auctioneer will be finalised on March 6. The delay is likely to push spectrum auction to July-August this year, as per sources.
SBI: Telcos yet to approach on AGR funding
SBI Chairman Rajnish Kumar on Friday said telecom companies have not approached the bank on financing their Adjusted Gross Revenue (AGR) dues.
Kumar said it’s incumbent on the telecom companies to find money and will be safe to presume that they would have made some arrangements for it by now. The SBI chairman’s comments on telecom companies came after the Supreme Court made it clear that they will have to cough up the Rs 1.47 lakh crore in AGR dues and also questioned why contempt proceedings should not be initiated against those who are coming in way of implementing its order.
“It is now for the telecom companies to decide how will they find the money or what course of action they will take,” Kumar told reporters on the sidelines of the annual NTLF here. “They would have made their arrangements is what I presume,” Kumar said. (With PTI)