AGR issue ruling may affect telecom firms’ ability to repay loans to banks; IndusInd has highest exposure

The Supreme Court’s decision to allow the central government’s plea to recover adjusted gross revenue (AGR) of about Rs 92,000 crore from telecom service providers could put stress on the companies’ ability to repay loans to lenders or banks.

The apex court has rejected all other submissions of the telecom companies. It added that the service providers would have to pay penalties and interests to the DoT. This comes as a major setback for telecom operators — Bharti Airtel Ltd and Vodafone Idea Ltd — as the companies would have to shell out a massive Rs 50,000 crore of the AGR at a time when they are already grappling with debt pressure and declining revenues.

The additional outflow from telecom operators could put stress on their ability to repay loans to lenders. Bharti Airtel’s debt stands at Rs 1.16 lakh crore while Vodafone Idea has a debt burden of Rs 1 lakh crore.

The telecom sector exposure of top banks as per their latest data in their quarterly presentation or Basel III disclosure suggests IndusInd Bank has the highest funded as well as non-funded exposure to telecom sector followed by YES Bank.

While the entire amount of exposure may not come under stress, even a delay in repayments can be a worry for banks.