Emkay projects 44% downside for Vodafone Idea shares despite ₹87,695 crore AGR relief

The Union Cabinet’s decision to approve a relief package for Vodafone Idea (VI) that freezes a substantial portion of its adjusted gross revenue (AGR) dues, offering near-term cash-flow relief, falls short of the waiver that markets were anticipating, Emkay Global said in a note.

The brokerage, which has a sell rating and a target price of ₹6, implies a downside potential of over 44%. It indicated that the Cabinet has granted the company a five-year, interest-free moratorium on AGR dues pertaining to periods prior to FY18. These dues, amounting to ₹87,695 crore, will now be repaid over a 10-year period from FY32 to FY41. However, AGR liabilities related to FY18 and FY19 will remain unchanged and will be payable as scheduled over FY26 to FY31.
The decision dashed expectations of a meaningful haircut on AGR liabilities. “Contrary to the street’s expectations of at least a 50% waiver, no waiver on the pending dues linked to AGR was provided by the Cabinet,” Emkay noted, adding that the absence of a write-off limits the upside from the relief package.

As part of the decision, the Department of Telecommunications (DoT) will set up a committee within six to eight months to reassess the AGR dues. This exercise will include a recalculation and reevaluation of AGR liabilities, including a review of interest and penalty components, and a reassessment of the frozen dues based on audit reports. Emkay pointed out that this leaves some scope for a further reduction in the AGR liability, although the outcome and timing remain uncertain.

The report also highlighted that the DoT has raised an additional AGR demand of ₹9,450 crore linked to reassessment and reconciliation for the FY16–17 period. Under the earlier payment schedule as of March 2025, Vodafone Idea was required to pay ₹75,900 crore in six equal annual instalments starting March 2026. The revised framework pushes out a significant portion of these payments, easing near-term pressure on cash flows.

Despite this relief, Emkay cautioned that Vodafone Idea’s financial position remains highly stressed. While the AGR package addresses one part of the problem, the company continues to face deferred spectrum payment obligations of nearly ₹1.2 lakh crore, with significant repayments scheduled between FY26 and FY44.
Operationally, the numbers offer little comfort. VI’s pre-Ind AS 116 annualised EBITDA stands at just ₹898 crore, equivalent to 6.7% of its spectrum debt. Cash balance was ₹3,080 crore as of the end of Q2 FY26. Management has guided for capital expenditure of ₹7,500–8,000 crore in FY26, which Emkay said further exacerbates leverage pressures. “Current EBITDA is insufficient to meet the capex or the spectrum debt repayment requirement,” the brokerage said.

Even after excluding AGR dues, leverage remains elevated, prompting Emkay to argue that the government will need to consider a broader plan to address spectrum liabilities. The report said further capital infusion and restructuring of spectrum debt are critical for the company’s long-term sustainability.

On the outlook, Emkay acknowledged that repeated government interventions suggest an intent to keep Vodafone Idea solvent. However, it added that deeper reforms are required to make the company structurally stronger with manageable leverage.

Valuations, too, remain a concern. The stock is trading at 13.6 times FY27E EV/EBITDA, which Emkay considers expensive in light of high leverage and limited visibility on the government’s stance on spectrum debt.