Tatas Arranging Rs 14,000 Crore To Clear Telecom Arm’s Outstanding AGR Dues

The Tata group holding firm, Tata Sons, is readying around Rs 14,000 crore from banks and internal accruals to pay the adjusted gross revenue (AGR) dues of Tata Teleservices to the government before the January 23 deadline set by the Supreme Court expires.

According to a banking source, Tata Tele, a subsidiary of Tata Sons, along with Tata Teleservices (Maharashtra), which was operating telephony in the Maharashtra and Goa circles, has already made provisions for the payment. While the liabilities/provisions pertaining to the AGR dues of Tata Tele (Maharashtra) are Rs 2,151 crore, the rest have been made by Tata Tele.

Of the total AGR dues of Rs 13,823 crore, Rs 10,000 crore will be raised from banks by Tata Sons, while the remaining will be raised from internal accruals. Tata Sons is readying the cash pile because Tata Tele will not be able to raise such a huge amount to pay before the three-month deadline ends, said the source.

When contacted, a Tata Sons spokesperson declined to comment.

The two Tata group companies, along with other telecom companies, have also filed review petitions in the Supreme Court.

But Tata Sons has decided to keep the money ready in case the court rejects the petitions, said the source. In its judgment on October 24, 2019, the Supreme Court dismissed the appeals of all telecom services operators and allowed the Department of Telecommunications’ (DoT’s) appeal in respect of the definition of gross revenue and AGR as defined in the licence agreement. While Bharti Airtel and Vodafone Idea are hit with the highest amount to pay to the DoT, Tata Tele, which has a defunct wireless business, is also impacted by the order.

This is not the first time Tata Sons has come forward to help out its telecom services business. In the last few years, Tata Sons invested additional equity in Tata Tele so that the company could meet its debt repayment obligations to banks. The group holding company also had to buy back Tata Teleservices shares from its erstwhile joint venture partner NTT Docomo under an agreement the Japanese major had signed when it invested in the telco.

After the Tata group decided to exit the wireless telephony business, it repaid the entire loans of the now defunct company, gaining confidence of Indian banks, which are saddled with huge bad debt.

With this payment, the Tata group will end up paying a substantial amount on behalf of Tata Tele. In October 2017, Tata Sons had transferred the wireless telephony business to Bharti Airtel for free. The transaction between Tata Tele and Bharti Airtel is still awaiting the DoT’s clearance.

The additional fundraising will also impact Tata Sons’ financials for the current financial year ending March 2020, like in the previous years when it had to make huge provisions for its telecom venture. Tata Sons has already written off nearly Rs 50,000 crore worth of its investment in Tata Tele in five tranches beginning fiscal year 2015. The holding company used this accounting entry to pay off nearly Rs 50,000 crore worth of debt owed by Tata Tele to various lenders last year.

With the latest Supreme Court ruling on AGR, Tata Tele’s financial payouts are now equivalent to nearly two-thirds of Tata Sons’ dividend income from group listed firms in the last 15 years. After this, Tata Sons’ total financial payout (to Docomo and government) goes up to around Rs 60,000 crore against its cumulative dividend income of around Rs 93,000 crore from various listed companies since 2004 when Tata Consultancy Services (TCS) got listed on the bourses. TCS accounts for a lion’s share of Tata Sons’ total income, contributing nearly Rs 83,000 crore to its coffers by way of equity dividend and proceeds from share buyback since its listing in 2004.―Business Standard