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SC allows GoI to re-examine the AGR issue; upgrade Vi to Neutral

* Supreme Court (SC) has permitted the Union government (GoI) to re-examine the AGR verdict, taking into account the fact that GoI now holds 49% equity stake in Vodafone Idea (Vi) and aiming to prevent any disruption in services for ~200m Vi customers.

* The SC observed that any decision regarding AGR relief lie within the policy domain of the Union, thereby clearing the way for the GoI to extend such relief.

* We believe this verdict is a positive step and expect the GoI to revisit the AGR issue and announce relief measures soon.

* The verdict is a material positive for Vi, as it could lead to a significant reduction in its AGR dues (~INR3.6/share boost in case of ~50% waiver). However, we believe a part of this potential relief is already factored into Vi’s CMP (stock up ~35% since Vi’s latest petition in Sep’25).

* The potential AGR relief underscores the GoI’s commitment to maintaining a 3+1 market construct in the Indian telecom sector and could also facilitate Vi’s long-pending debt raise. This, in turn, would support the continuation of Vi’s INR500-550b capex plans and consequently uplift sentiment for Indus Towers.

* We believe any relief would likely be sector-wide rather than limited to Vi. However, we await further clarity, as the SC observed that GoI’s 49% stake in Vi as a key factor in permitting a re-examination of the AGR dues, which could exclude telcos such as Bharti and Hexacom from similar relief.

* If the GoI were to provide relief to Bharti and Hexacom, the cash flow boost could be significant. However, the benefit would account for only ~2-3% of their market caps (in case of a complete waiver).

* Moreover, any relief for Vi would delay (if not completely eliminate) the prospects of a duopoly in the Indian telecom sector, and make incremental market share gains from Vi more challenging for Bharti and RJio in the near to medium term.

* We raise our TP for Vi to INR10/share (vs. INR6.5 earlier) as we bake in partial AGR relief and upgrade the stock to Neutral (from Sell earlier).

* On our estimates, Vi would still face a cash shortfall of ~INR270b over FY26-28E, despite assuming a debt raise of ~INR250b.

* Vi’s LT revival still hinges on additional relief measures, such as tariff hikes and reduction in competitive intensity (especially on customer acquisition costs), none of which are within the company’s control. This prevents us from turning more constructive at this stage.

SC clears the way for GoI to re-examine AGR dues and grant relief

* SC has permitted the GoI to re-examine the AGR verdict, taking into account the fact that GoI now holds 49% equity stake in Vi and aiming to prevent any disruption to services for ~200m Vi customers.

* As per media articles, the GoI has been looking to provide relief to Vi on AGR dues (repayments starting Mar'26) but was awaiting SC’s approval before making any announcement.

* The SC’s observation that decisions on AGR relief fall within the policy domain of the Union has now cleared the way for the GoI to extend such relief.

* We believe this verdict is a positive step and expect the GoI to revisit the AGR matter and announce relief measures soon.

SC verdict a material positive for Vi and sentimentally positive for Indus

* SC’s verdict is clearly a positive for Vi, which will now engage with DoT for relief on its ~INR775b AGR dues (with ~INR164b annual repayments currently, starting from Mar’26).

* Overall, AGR dues account for ~INR7/share for Vi (see Exhibit 1). Based on the company’s past submissions, we believe there could be a demand for: i) ~INR60b reduction in the base amount, ii) complete waiver of penalties and interest on penalties, and iii) a partial waiver of the interest component.

* On our estimates, the potential relief could amount to ~INR380b (or ~50% of Vi’s current AGR outstanding), translating to ~INR3.6/share.

* We note that since Vi’s recent petition to the SC, the stock has risen by ~INR2.6/share (or 35%) and already bakes in relief on AGR dues to some extent.

* However, a tangible relief on AGR dues should also provide confidence to lenders on the GoI’s commitment to a 3+1 market structure in the Indian telecom industry, thereby enabling Vi’s long-pending debt raise.

* A reduction in AGR dues, along with debt raise, would ensure the continuation of Vi’s ~INR500-550b capex plan, which will also be beneficial for Indus Towers (more sentimentally than in terms of earnings upgrades).

No clarity yet on applicability of any potential relief measures for Bharti

* We believe any relief by the GoI will have to be sector-wide rather than limited to Vi.

* However, the SC’s observation on GoI’s 49% stake in Vi as a key factor in permitting a re-examination of dues could rule out relief for other telcos (such as Bharti, which was not a petitioner alongside Vi this time).

* Further, we note that Bharti had written to the GoI seeking an equity conversion of its AGR dues, in line with the Sep’21 relief measures, which we believe was a measure to ensure equal treatment (vis-à-vis Vi) in the event of any relief.

* We await further clarity on the applicability of the SC’s verdict and, consequently, the potential for relief to other telcos.

* If the verdict were to extend to Bharti and Hexacom, we note that while the overall AGR dues are material from a cashflow perspective (~INR400b for Bharti and ~INR16b for Hexacom), they form only ~2-3% of the market cap.

* Moreover, a significant relief for Vi, followed by a debt raise, could improve its competitiveness at least in the near to medium term, potentially impacting the pace of market share gains.

Valuation and view

* The SC’s verdict is a material positive for Vi as it could lead to a significant reduction in its AGR dues (~INR3.6/share boost in case of ~50% waiver), though we believe a part of the relief is already factored into Vi’s CMP (stock up ~35% since Vi’s latest petition in Sep’25).

* Apart from a potential reduction in the AGR liability, GoI’s commitment to the 3+1 market structure could enable the successful completion of Vi’s longpending debt raise and, thereby, ensure improved competitiveness.

* We believe the verdict is sentimentally positive for Indus Towers as it improves visibility on the continuation of Vi’s capex plans, though it is unlikely to drive any material earnings upgrades.

* We raise our TP for Vi to INR10/share (vs. INR6.5 earlier) as we bake in a partial AGR relief and upgrade the stock to Neutral (from Sell earlier).

* Vi’s LT revival still requires additional relief measures, such as tariff hikes and a reduction in the competitive intensity (especially on customer acquisition costs), none of which are within the company’s control. This prevents us from turning more constructive at this stage.

* We continue to prefer Bharti (BUY, TP INR2,285) and RJio (RIL, BUY, TP INR1,700) in the telecom space and remain Neutral on Indus (TP INR390) and Hexacom (TP INR1,900).

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