Waiver of AGR dues to help Vodafone Idea stay afloat in telecom sector: Ambit Capital

A potential Central government decision to waive interest on unpaid adjusted gross revenue (AGR) dues, penalty and interest on penalty would enable Vodafone Idea (Vi) to raise bank debt, enabling India’s third-largest telecom carrier to carry out capital expenditure (capex) and hold on to its nearly 200 million subscribers, said Ambit Capital.

‘The government has consistently maintained its intent to maintain a 3+1 structure in the telecom industry. With the Supreme Court now providing clarity on potential relief, the government has no choice but to act,’ the brokerage said in a research note Friday, which ETTelecom has reviewed.

‘Waiver of interest on unpaid AGR dues, penalty and interest on penalty would help the company raise bank debt, giving VI an opportunity to expand its network, carry out capex and hold on to its ~200 million users,’ it said.

According to Ambit, with the government unwilling to increase its stake in the telco beyond 49% and promoters unable to commit additional capital, the conversion of Vi’s dues into equity is an “unviable alternative”.

It said deferring dues would “merely postpone the issue” without resolving it. Should the government choose this route, Vi may struggle to secure bank loans essential for funding its growth capex.

ET, in its May 23, 2025, edition, reported that Vi has revived debt-raising talks with banks that had stalled over uncertainty around the telco’s regulatory dues.

The telco has been discussing fundraising with lenders since 2024, but the pace has picked up particularly after the Supreme Court on May 19 dismissed the company’s plea seeking a ₹45,000 crore waiver on penalties and interest linked to its ₹83,400 crore adjusted gross revenue (AGR) liability.

‘Without AGR relief, our calculation confirms what Vi argued in the SC. Repayment of current statutory dues would lead Vi to run out of its cash reserves by March 2026,’ Ambit said. ‘Thus, supportive action before the payment date of March 2026 is the most likely outcome.’

Vi plans to invest ₹50,000-₹55,000 crore in capex through FY28, mainly in 4G modernisation and 5G roll-outs, which is crucial for the struggling telco to bolster its networks and prevent subscriber port-outs to its stronger rivals, Reliance Jio and Bharti Airtel.

Between March 2024 and February 2025, the telecom joint venture between India’s Aditya Birla Group (ABG) and the UK’s Vodafone Group Plc, raised around ₹26,000 crore via equity, including ₹4,000 crore from vendors.

Vi has previously said it has been in discussions with lenders for over a year to secure ₹35,000 crore in bank financing, including ₹10,000 crore in non-fund-based credit.

Ambit Capital estimates that despite tariff hikes in July 2024, Vi’s annualised 3QFY25 cash EBITDA of ₹9,800 crore isn’t sufficient to pay off ₹16,900 crore due in FY26.

‘In June 2025, Vi will likely receive ₹64bn (₹6,400 crore) equity funding from Vodafone PLC as an indemnity payment. But the same isn’t sufficient for Vi to raise bank loan funding of Rs250bn (₹25,000 crore), which is necessary for the company to carry out its target ₹500-550bn (₹50,000-55,000 crore) FY25-28 capex,’ the brokerage said.

As of December 31, 2024, Vodafone Idea’s bank debt was ₹2,330 crore. At the same time, government dues related to spectrum and AGR liabilities were at ₹2.15 lakh crore, excluding interest. Under the 2021 telecom relief package, large repayments were deferred until October 2025.