India’s big telecom players, except Jio, pleaded before the Supreme Court on Monday for a staggered payment of adjusted gross revenue (AGR) dues over 15 years after the apex court scotched their mild attempts for recalculation of the Rs 1.6 lakh crore claimed by the department of telecommunications (DoT).
Irked by fresh attempts by telecom service providers to recalculate the AGR dues and the sympathetic stand taken by DoT, a bench of Justices Arun Mishra, S Abdul Nazeer and M R Shah said the “thought should not cross the minds of defaulters even for a second”. “There will be no recalculation of the dues and whatever DoT had told the court earlier will have to be paid,” the bench said.
Worst hit Vodafone Idea, through senior advocate Mukul Rohatgi, said the company had no funds to pay right now but promised that it would make good the payments in 15 years. Bharti Airtel’s counsel, senior advocate A M Singhvi, too proposed a 15-year timeline for payment of AGR dues in instalments. Solicitor general Tushar Mehta said a 15-20-year timeline for payment would bode well for the economy. The bench reserved its verdict on the timeline issue.
Mehta said many telecom companies were under insolvency. The bench wondered whether it was a ploy to escape payment of AGR dues and asked DoT to place on record all documents relating to finances of the companies under insolvency.
It posted further hearing for August 10 on issues relating to telecom companies under insolvency.
According to data given by DoT, telecom players such as Bharti Group, Vodafone Idea and Tata Group owed major chunk of AGR dues (see graphic). Quadrant Televentures has an outstanding amount of Rs 189 crore after it paid Rs 69 lakh.
A report by analysts at foreign broking major Morgan Stanley estimated that, on an annualised basis, sensex companies would show a 22% decline in revenue, while for Nifty companies it would be 29%. “Net profit growth for sensex and Nifty companies is expected at -33% and -41%, respectively, in Q1FY21,” it said in a note. For all the companies tracked by Morgan Stanley’s analysts, the decline in net profit is estimated at 45%.
Another report by Bank of America Merrill Lynch noted that the 96 companies its analysts track are expected to show an earnings decline of 40% on a yearly basis and, when financials are excluded, the decline could be even sharper at 60%.
Analysts at Motilal Oswal Financial Services, another domestic financial services house, expect the companies under their coverage to report a net profit decline of 49%. They see companies in sectors like auto, telecom, metals, capital goods and retail to post losses, while private and PSU banks are the only sectors likely to post marginal growth even as technology is expected to remain flattish.
“One silver lining is the revival in rural demand. Data and commentary of various managements point toward rural recovery as impact of the pandemic seems lower in rural areas compared to urban centers,” it said in a recent report.
“The rural recovery should be further supported by the government’s incremental spending in the rural economy, including substantial hike in MNREGA allocations to Rs 1 lakh crore; better-than-expected start to the southwest monsoons, and strong Kharif sowing.”
Analysts also said that, with widespread lockdowns and a gradual opening that was witnessed through the last quarter, earnings were expected to decline sharply. However, going forward, rather than the earnings per se, the commentaries from the companies’ top management about the future would drive the investor sentiment and hence the stock prices.
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