Vodafone Idea Ltd (Vi) has endured a turbulent decade. Thanks to the Government of India’s (GOI) support, the company has managed to survive in an increasingly oligopolistic market.
The GOI support came through the conversion of debt into equity, and after the latest conversion in April 2025, the government has emerged as Vi’s largest shareholder with a 49% stake.
However, despite the government’s 49% stake, adjusted gross revenue (AGR) dues remain a near-term challenge. Despite a four-year moratorium on payments, Vi faces Rs 76,000 crore of dues, beginning March 2026 — a make-or-break scenario for the telco.
In short, Vi is caught between relief and liability: government-backed debt-to-equity conversions have provided relief, but AGR dues remain a liability.
The stock, meanwhile, has mostly moved sideways in the last five years.
AGR dues and the Government of India
AGR dues represent usage and licensing fees that telecom operators pay to the Government of India. The dispute originated from differing definitions of AGR. Telecom companies argued AGR should only include income from core services, while the Department of Telecommunications (DoT) argued for a broader definition encompassing all revenue sources.
In 2019, the Supreme Court upheld the DoT’s position, imposing a crippling financial liability on Vi. In response to the sector’s distress, the government introduced a relief package in 2021. This offered a four-year payment moratorium and, critically, gave operators the option to convert the interest on these deferred dues into government equity.
Vi opted for this conversion in 2023, which led to the Government of India acquiring an initial stake of 33%. Then, on 8 April 2025, GOI, through DIPAM (Department of Investment & Public Asset Management), further increased its stake to nearly 49%.
This move transformed the government’s role from a regulator and creditor into the company’s single largest shareholder.
Ongoing balance sheet cleanup
Following the GOI’s increased stake in Vi, the company has been making a comeback effort. It raised Rs 61,000 crore, including debt-to-equity conversion of nearly Rs 37,000 crore by the government in the last financial year.
This wiped a huge liability off Vi’s books, making banks willing to lend. While the company is now on stable ground, the turnaround isn’t complete. Vi still needs to secure more loans to fund its full 5G rollout and settle remaining government dues. To that end, it has already approved plans to raise another Rs 20,000 crore through debt or equity, to keep the capex momentum going.
After a successful Rs 18,000 crore follow-on public offering (FPO) in April 2024, Vi deployed funds to reduce its bank debt and invested Rs 50,000-55,000 crore into upgrading its 4G network and launching 5G.
The plan is already showing positive results:
- 4,800+ new 4G towers added in Q1FY26
- 4G population coverage jumped from 77% to 84%
- 5G services are now live in 22 cities
Subscriber count up, debt down
For investors, the key takeaway is that customers are taking notice of these efforts.
The pace of subscriber attrition has dropped significantly compared to last year, with the average revenue per user (ARPU) now up to Rs 177.
ARPU has been increasing consistently over the last 16 quarters, in line with ARPU increases seen by other operators.
Meanwhile, bank debt has also reduced significantly over the last three years.
When the largest shareholder is also the largest creditor
The Supreme Court’s 2019 ruling significantly increased liabilities for telcos, including Vodafone Idea Ltd.
In September 2021, the Government of India announced a Telecom Reforms Package, allowing a 4-year moratorium on payment of AGR dues. After the moratorium, the remaining liability is payable in six equal annual installments (around Rs 16,000 crore) starting 31 March 2026, extending up to FY31.
It also gave telcos an option to convert spectrum-related debt into equity, which Vi exercised in March 2023 and March 2025. This means that the government, through DIPAM, is now the single largest shareholder in Vi with a 49% shareholding.
On 19 May 2025, the Supreme Court rejected Vi’s plea for waiver.
On 8 September 2025, Vi filed an ‘amended petition’ seeking a waiver. Thecase is likely to be heard on 27 October.
Valuation
If the expected one-time waiver of ~ Rs 45,000-55,000 crore materialises, Vi’s liabilities will reduce by an equivalent amount, and the book value will increase.
Given Vi’s current market capitalisation of Rs 98,000 crore, this potential liability reduction is enormously material.
As of 30 June 2025, Vi has a debt liability of Rs 1,99,000 crore. This includes three components:
- Spectrum dues to GOI: Rs 1,19,000 crore
- AGR dues: Rs 76,000 crore
- Bank debt: Rs 1,930 crore
If the AGR waiver materialises, it will not only remove the biggest overhang on the balance sheet but will also allow the company to raise bank debt by Rs 25,000-35,000 crore, enabling Vi to proceed with its planned Rs 50,000-55,000 crore capex over the next three years.
Note: We have relied on data from http://www.Screener.in and http://www.tijorifinance.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He also worked at an AIF, focusing on small and mid-cap opportunities.
Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article.
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The GOI support came through the conversion of debt into equity, and after the latest conversion in April 2025, the government has emerged as Vi’s largest shareholder with a 49% stake. (Photo Credit: Vodafone Idea)
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