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Vodafone Idea share price sinks; takes down SBI, Axis Bank, Canara Bank stocks too after AGR ruling

Kshitij Bhargava

As telecom companies failed to get some respite from the Supreme Court on their adjusted gross revenue (AGR) dues, Vodafone Idea shares sunk more than 22 per cent, taking along stocks of government and private banks with exposure to the telecom industry. Nifty Bank was down 1.25 per cent or 390 points, as 10 of the 12 banks on the index were trading in the red. IDBI Bank share price was down 0.84 per cent; Canara Bank slipped 1.69 per cent; Axis Bank share price fell by 1.54 per cent. Meanwhile, State Bank of India share price fell 2.41 per cent on BSE.

The Supreme Court chided the telecom operators saying that they were in contempt of its order to pay the dues amounting to Rs 1.47 lakh crore. The apex court directed the Managing Directors and CMDs of telecom companies to be present in the court on its next hearing which is scheduled for March 17 to explain why contempt proceedings should not be launched against them for not following the Supreme Court order. "We don't know who is creating this nonsense. Is there no law left in the country? It is better not to live in this country and rather leave the country," the bench headed by Justice Arun Mishra observed.

Shares of Vodafone Idea fell 22 per cent to trade at Rs 3.50; Bharti Infratel share price was down 5.45 per cent trading at Rs 231; Tata Teleservices fell 5.71 per cent to trade at Rs 3.30 and Reliance Communications fell 6.67 per cent to trade at Rs 0.70 during the day. However, Bharti Airtel shares gained 4.69% to end at Rs 565. The failure to get a reprieve threatens the survival of Vodafone Idea. Vodafone Group Plc Chief Executive, Nick Read had in November said that the company's India unit could be headed for liquidation if there is no relief on the demand to pay AGR dues. Vodafone Idea owes over Rs 53,000 crore to the telecom department, while Bharti Airtel owes around Rs 35,000 crore.

Banks with exposure to the telecom industry too suffered losses in the market as fears of an increase in non-performing assets spiked. State Bank of India, IDBI Bank, Canara Bank, Bank of India, Bank of Baroda and Axis Bank have significant exposure to the telecom industry, according to a report by Fitch Ratings. "Supreme Court’s strongly worded rejection of the modified plea filed by incumbent telcos means that chance of any relief on deferred payment of AGR due is remote now. Vodafone Idea survival is unlikely unless there is fresh equity infusion from promoters," said Nitin Soni, Director-Corporate Ratings, Fitch Ratings while talking to The Financial Express Online.