According to Axis Capital, Bharti Airtel is better placed to make upfront payment with respect to AGR dues in case of a court. This is because the operator has more cash available as well as assets which can be put up for monetisation. Owing to these factors, the telco is in a favorable position to raise funds from the market.
As per recent estimates, Airtel has to pay a balance of Rs 260 billion as AGR dues.
The report noted that if the court accepts a 20-year staggered plan for the payment of balance AGR dues, maintaining the same NPV with 7.5 per cent interest rate will result in cash outgo of Rs 25.5 billion per year. In case of 10-year staggered payment, yearly payment could increase to Rs 37.8 billion, which also seems manageable for Airtel.
Also, owing to an increase in tariffs in December 2019, the operator has been able to enhance its cash flow which can be leveraged to make the AGR dues payment. Axis Capital noted that Airtel had Rs 136 billion in cash at end of Q4FY20.
Further, the report also indicated that the court could ask for some upfront payment in order to allow staggered payment of the remaining AGR dues.
Meanwhile, Axis Capital noted that Vodafone Idea may also manage to survive if upfront payments are negligible and AGR payments are spread over 20 years. However, a large upfront payment or AGR dues spread only over 10 years might cause problems for the operator.