The Supreme Court’s latest ruling on the issue of Adjusted Gross Revenue creates a dire situation for Vodafone Idea, according to analysts at Bernstein.
"We do not see how they can meet the demands of the court and are, therefore, in threat of insolvency," Bernstein analysts said in a research report.
The Government had officially requested interest and penalties imposed on the operators be frozen as of the October 24 ruling date, and that the court allow the operators up to 20 years to pay any outstanding balance at a reduced interest rate of 8 per cent.
The government highlighted to the court the importance of maintaining three viable private operators and maintaining services to the 300 million Vodafone Idea customers, besides the consequences a bankruptcy would have on employment and the banking sector.
The Supreme Court, however, refused to consider any amendment to their earlier ruling. They have denied any relief for the sector, saying that to do so would make the Supreme Court party to fraud.
They have also questioned why the operators were allowed to self-assess, which indicates that the earlier (higher) assessed amount is likely to stick. However, they agreed to postpone the matter for two weeks and consider the plea by the Solicitor-General, regarding the payment plan.
Reliance Jio is the only operator to have made its full payment by the court ordered deadline of January 23. Given its late start in the industry, the company also had the smallest assessed liability of just Rs 195 crore. Bharti Airtel has paid a total of Rs 18,000 crore, which it claims is its full self-assessment of both principle and interest owed. This is roughly half the Rs 35,500 crore assessed earlier by the government. Vodafone Idea paid its self-assessed principle amount of Rs 6,850 crore. This does not cover any interest, penalties or interest on those penalties. Vodafone-Idea estimates it still owes Rs 14,600 crore, but the DoT's estimate is much higher.