Telecom stocks surged on Tuesday after media reports suggested the government had approved a proposal to waive bank guarantees (BGs) for spectrum purchases made before 2022.
The move will provide financial relief to telecom operators, who collectively owe over Rs 30,000 crore in guarantees to the government, and the biggest beneficiary of this move is likely to be Vodafone Idea Ltd, which owes over Rs 20,000 crore in bank gurantees.
Following the news, Vodafone Idea shares surged 15% to hit the upper circuit limit of Rs 8.02 during the session on Tuesday before falling slightly to trade at around Rs 7.94 apiece. The stock, which had closed at Rs 6.98 in the previous session, now commands a market capitalization exceeding Rs 55,000 crore. The stock, however, remains down nearly 60% from its 52-week high of Rs 19.15.
On the other hand, MTNL shares also jumped 6.05% to Rs 50.11 apiece, while Tata Teleservices (Maharashtra) surged 11.40% to Rs 76.92 in early trade on Tuesday. The two stocks, however, pared some gains later in the session.
At the same time, Bharti Hexacom rose 4.42% to Rs 1,380 before slipping into the red zone. Bharti Airtel and Tata Communications also posted smaller gains in the range of 1-1.5% in early morning trade, but gave up most of the gains in the second hour of trading. Reliance Industries, the parent company of Reliance Jio, edged up by 0.68%.
Media reports on Tuesday also pointed out that Vodafone Idea is required to submit bank guarantees worth Rs 24,600 crore. On the other hand, Reliance Jio has to submit bank guarantees worth Rs 4,000 crore while Bharti Airtel’s annual obligations from previous auctions stand at Rs 3,000 crore.
The Cellular Operators Association of India (COAI), representing private telecom operators, had previously urged the Department of Telecommunications (DoT) to eliminate BG requirements for auctions held prior to 2022. Bharti Airtel also advocated for equal treatment across all telecom operators, regardless of their financial standing.
