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Following the recent AGR (Adjusted Gross Revenue) relief, Citi Research, in its report, has presented a more positive outlook on Vodafone Idea, noting that the resolution of the long-running dues issue significantly improves the company's financial position, although risks remain.
According to the report, the government has reassessed Vodafone Idea's AGR dues at Rs 640 billion (approx. Rs 64,000 crore) as of December 2025, which is about 20 per cent lower than the earlier outstanding amount of Rs 805 billion reported by the company. It stated, "With this chapter of regulatory uncertainty now largely behind it, we believe VI is better positioned to close its pending c. Rs 250 billion bank debt raise." Citi Research highlighted that the revised structure of the dues provides meaningful relief. With no interest accruing on the outstanding amount and an effective 10-year repayment moratorium--where 99 per cent of the dues are payable between FY36 and FY41--the overall burden on the company has reduced significantly. On a net present value (NPV) basis, Vodafone Idea's AGR liability is estimated to decline from around Rs 350 billion to Rs 260 billion, improving the economics of its obligations. The report said that, with regulatory uncertainty largely resolved, Vodafone Idea is now better positioned to move forward with its funding plans. The company is looking to raise around Rs 250 billion in bank debt, which is critical for executing its Rs 450 billion three-year capital expenditure plan outlined in January 2026. Citi Research noted that the closure of this debt funding will be a key factor to monitor going forward, as it will enable the company to strengthen its network and improve competitiveness. The report also pointed out that there is still a need for clarity on the accounting treatment of the reassessed AGR dues, especially given the absence of interest accrual. The Adjusted Gross Revenue (AGR) issue was a long-standing legal dispute in India between telecom operators and the Department of Telecommunications (DoT) regarding the definition of revenue used to calculate licence fees and spectrum charges. The core conflict is whether AGR should include only core telecom revenue or also non-core revenue such as asset sales, interest, and rent. After clearance from the Supreme Court, and to ensure market competition and avoid a duopoly in the telecom sector, the government has finalised a 27 per cent reduction in Vodafone Idea's AGR dues to Rs 64,046 crore and extended the repayment schedule until FY41. Additionally, the government has converted the company's debt into equity and has become the largest stakeholder, holding a 48.99 per cent stake in Vodafone Idea as of May 2026. Citi Research has also revised its financial projections, factoring in a delay in tariff hikes from its earlier expectation of the first quarter of FY27 to the third quarter of FY27. As a result, EBITDA estimates for FY27 and FY28 have been reduced by 6-7 per cent. Despite these adjustments, the firm has maintained its target price for Vodafone Idea at Rs 14, while also lowering its target EV/EBITDA multiple to 12 times, maintaining a discount compared to peers. The report added that successful debt raising by Vodafone Idea could also have positive implications for Indus Towers Limited. However, Citi Research continues to rate Vodafone Idea as a high-risk investment, citing its still highly leveraged balance sheet and dependence on continued government support. Key risks highlighted include limited AGR relief, rising competitive pressure affecting tariff hikes, continued subscriber churn, and slower-than-expected growth in 4G and 5G subscribers. (ANI)
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