Bruises from the price war unleashed by Reliance Jio were aggravated by the Supreme Court’s recent Adjusted Gross Revenue (AGR) ruling, which slapped a fresh payment liability of nearly Rs 50,000 crore on the two companies.
Vodafone-Idea’s Rs 50,922-crore loss is the biggest loss in a quarter in India Inc’s history. For Airtel, the loss is at Rs 23,045 crore, the third-biggest for any Indian company (behind Tata Motors’ Rs 26,993 crore loss in the quarter ended December 2018) on impairment charge towards Jaguar & Land Rover).
If relief not offered immediately, telcos may slip into bankruptcy, say experts
The only silver lining for Vodafone-Idea and Bharti Airtel is that since their massive losses are due to frontloading of all possible liabilities, including that arising out of the top court’s judgement, they may come down significantly in case the government provides them relief by way of staggered payments or moratorium.
Industry watchers say if some relief is not offered immediately — the companies have been ordered to pay back the money in three months by the top court as well as the telecom department (DoT) — the companies may slip into bankruptcy, leading to bank and statutory payment defaults, apart from massive job losses.
Vodafone Idea — whose share crashed by 20% and closed the day at Rs 2.95 (before the announcement of results) — made it amply clear that its ability to survive now depends on a government bailout.
In its regulatory filings post the results, the company said, “It is to be noted that our ability to continue as going concern is dependent on obtaining the reliefs from the government… and positive outcome of the proposed legal remedy. Pending the outcome of the above matters, these financial results have been prepared on a going concern basis.”
Airtel’s auditor Deloitte Haskins & Sells also said that the company’s ability to continue may be impacted if its remedial action does not bear fruit.