Mumbai: The outcome of the adjusted gross revenue (AGR) case, which will be heard in the Supreme Court on Thursday, will decide the course for telecom shares, mainly Vodafone Idea, which has more than doubled in the last one month. The hearing may include the government’s application that telcos be allowed to spread the payment of their dues over 20 years or less. Analysts said if the court asks companies to pay sooner, it could bring the rally in these shares to a screeching halt.

“If they get any time period lesser than 15-20 years to pay AGR dues they won’t have much money to invest in 4G CAPEX. This would have implications on market share as without such investments they would end up losing market share,” said Rajiv Sharma, head of research at SBICAP Securities, which has kept its rating on Vodafone Idea under review. “If they have to pay everything up front, then Vodafone Idea may decide to shut down and they may get referred to NCLT (the National Company Law Tribunal) .

The telecom operator has paid Rs 6,854 crore out of the Rs 58,254 crore it owes the government in AGR dues. The stock ended up 7.34 percent at Rs 10.82 on Wednesday. It has surged 136 percent from 4.58 level a month ago. In comparison, peer Bharti Airtel’s shares are up 6 per cent in the last one month.

The rally in Vodafone Idea shares has been amid dipping delivery volume, suggesting long-term investors remain skeptical about its debt levels and AGR dues.

Data compiled by ETIG Database shows that the delivery volume percentage in the last week was close to 23 percent and was 26.9 percent in the last one month. This is similar to the 3-month average delivery volume of 28.6 percent and a 6-month average delivery volume of 28.54 per cent.

“It points to speculation activity in the counter. The Telecom sector looks good and the stock is moving because other telecom giants are rallying. One can sell the Vodafone stock on the further rally,” said Chandan Taparia, derivatives analyst at Motilal Oswal.

News Source: EconomicTimes

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