Vodafone Idea Shares Surge on AGR Relief Hopes, but Brokerages Urge Caution
Shares of Vodafone Idea (Vi) surged nearly 10 percent on January 1, extending their recent rally, as investors cheered fresh signs of government support and a financial inflow from the Vodafone Group. The stock climbed to an intraday high of Rs 11.83, buoyed by reports that the Union Cabinet has approved a five-year moratorium on the telecom operator’s adjusted gross revenue (AGR) dues.
However, even as optimism returned to the counter, brokerage firm Emkay Research struck a cautious note, reiterating its ‘Sell’ rating and warning that the stock still faces a potential downside of more than 44 percent from current levels.
Cabinet Nod on AGR Relief Lifts Sentiment
According to government sources, the Union Cabinet has approved an AGR relief package for Vodafone Idea, providing a significant near-term breather to the debt-laden telecom operator. As part of the decision, the government has granted a five-year moratorium on the company’s AGR dues.
Sources said a Department of Telecommunications (DoT) committee will be formed to reassess and re-evaluate Vodafone Idea’s AGR liabilities. The committee will examine audit reports and may consider the reversal of interest and penalties, if applicable, offering further relief to the telco.
Under the approved package:
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AGR dues worth Rs 87,695 crore have been frozen
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Repayments have been rescheduled to FY32–FY41
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AGR dues related to FY18 and FY19 will be payable over the next five years
The announcement significantly eased immediate solvency concerns, triggering strong buying interest in Vodafone Idea shares at the start of the new year.
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Vodafone Group Funding Adds to Near-Term Relief
Adding to the positive momentum, Vodafone Idea is set to receive around Rs 5,836 crore from the Vodafone Group as part of the re-settlement of a long-standing liability claim between the two entities. Regulatory filings by both companies confirmed the revised agreement.
Under the amended pact:
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Vodafone Group promoters will release Rs 2,307 crore over the next 12 months
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The Vodafone Group has also set aside its 328 crore shares in Vi for the benefit of the Indian telecom company
This infusion is expected to strengthen Vodafone Idea’s cash position in the near term and support ongoing operations and capital expenditure requirements.
Emkay Maintains ‘Sell’, Flags Structural Weaknesses
Despite the relief measures and funding support, Emkay Research remains bearish on Vodafone Idea. On January 1, the brokerage reiterated its ‘Sell’ rating on the stock, assigning a target price of Rs 6 per share.
“This implies a downside potential of over 44 percent from the stock’s previous closing price,” Emkay said in its note.
The brokerage highlighted that Vodafone Idea’s financial position remains deeply stressed, even after multiple rounds of government relief.
“Vi’s pre-IndAS 116 annualised EBITDA stands at Rs 8.98 billion, which is just 6.7 percent of its spectrum debt, with a cash balance of Rs 30.8 billion as of end-Q2FY26,” Emkay noted.
High Leverage Remains a Key Concern
Emkay pointed out that Vodafone Idea’s leverage remains elevated, even if AGR dues are excluded from the equation. The management has guided for capital expenditure of Rs 75,000–80,000 crore for FY26, aimed at improving network quality and competitiveness.
“With this level of capex, leverage remains high even without AGR dues. The government will need to consider a comprehensive plan for reducing spectrum debt,” the brokerage said.
According to Emkay, long-term sustainability will require:
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Further capital infusion
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Restructuring of spectrum liabilities
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Clear policy direction on reducing overall debt burden
“We believe that further capital infusion and restructuring of the spectrum liabilities is crucial for long-term sustainability of the company,” the report added.
Valuations Seen as Stretched
Another key concern flagged by Emkay is Vodafone Idea’s valuation. The brokerage believes the stock is trading at expensive levels relative to its earnings visibility and balance sheet strength.
“Despite repeated government relief packages, Vi’s leverage remains high. To make Vi a structurally strong company with manageable leverage, deeper reforms will be required,” Emkay said.
While acknowledging that the government has taken steps to ensure Vodafone Idea remains solvent, the brokerage stressed that solvency alone does not equate to long-term competitiveness in a capital-intensive telecom market.
Market Divided on Vodafone Idea’s Outlook
Vodafone Idea’s sharp rally reflects investor optimism that continued government support and promoter funding could help the company stay afloat and gradually stabilise operations. The AGR moratorium, in particular, has pushed large repayment obligations further into the future, easing near-term cash flow pressure.
However, analysts remain divided on whether these measures are sufficient to turn around the company fundamentally. Persistent losses, high spectrum debt, intense competition from rivals, and the need for sustained capex continue to cloud the long-term outlook.
For now, Vodafone Idea’s stock movement underscores a familiar pattern—sharp rallies driven by policy relief headlines, followed by renewed scrutiny of balance sheet strength and valuation risks.
As Emkay summed up, “We continue to maintain a ‘Sell’ rating due to high leverage, expensive valuations, and the lack of clarity on the government’s stance on spectrum debt.”
