Vodafone Idea share price cracked 15% after the Supreme Court rejected a plea by telecom companies on re-computation of adjusted gross revenues (AGR) dues.
Telcos, including Bharti Airtel and Vodafone Idea had filed curative petitions citing arithmetic errors in computation of the AGR demand by the government.
However, in a setback for telcos, the apex court bench comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna and BR Gavai on Thursday rejected the batch of pleas on re-computation of AGR dues.
The curative petitions by the telcos urged the Supreme Court to reconsider its 2019 judgement in favour of the Department of Telecommunications (DoT) order seeking AGR and other non-revenue related dues.
Telcos claimed that DoT made “a grave error” in the calculation of AGR dues and thus imposed “arbitrary” penalty amounts.
Vodafone Idea shares have already been trading weak after a global brokerage recently gave a ‘Sell’ call on the telecom stock, giving a downside target of ₹2.50 to ₹2.0 per share, noted Seema Srivastava, Senior Equity Analyst at SMC Global Securities.
“Now, the Supreme Court rejecting the telecom company’s plea to re-compute the Adjusted Gross Revenue (AGR) has further damaged the chances of recovery in Vodafone Idea shares. That's why the telecom stock is nosediving today,” Srivastava added.
Earlier this month, foreign brokerage firm Goldman Sachs maintained a ‘Sell’ rating on Vodafone Idea shares and predicted a target price of ₹2.5 apiece for the stock. The brokerage’s target on Vodafone Idea stock implied a sharp downfall of 83% from the prevailing price at that time.
“Vodafone Idea has large AGR/spectrum related payments starting in FY26; while the government has the option of converting some dues into equity, we estimate ARPUs would have to rise by ₹200-270 (120%-150% under different scenarios) versus December 2024E levels for Vodafone Idea to be sustainably free cash flow neutral, a low probability in the medium term in our view,” Goldman Sachs said in a report.
Excluding the impact from any such potential conversion, it expects FCF to be negative at least until FY31.
However, brokerages seem to be divided on Vodafone Idea shares as the target prices range from as low as ₹1.50 by Deutsche Bank, to as high as ₹23 per share from Ambit Capital.
According to Anshul Jain, Head of Research at Lakshmishree Investment and Securities, Vodafone Idea share price has immediate support placed at ₹11.50 apiece.
“So, those who own Vodafone Idea shares are advised to maintain a strict stop loss below the ₹11.50 per share mark and try to exit the stock if there is any relief rally. However, if the stock breaks down below ₹11.50 on a closing basis, we may see the stock touching ₹5.90 to ₹5.70 apiece in the short to medium term,” Jain said.
At 12:00 pm, Vodafone Idea shares were locked in at 15% lower circuit at ₹10.96 apiece, while Bharti Airtel shares were trading 0.65% higher at ₹1,665.65 apiece on NSE.
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