Two of India’s only three remaining private sector telcos -- Vodafone Idea (VIL) and Bharti Airtel - posted the highest ever quarterly losses since their inception on Thursday, primarily due to mammoth provisioning requirements arising from the Supreme Court’s verdict on adjusted gross revenue (AGR).

Both firms have consequently red-flagged uncertainty over their ability to continue as going concerns, with VIL stating that it is in the process of submitting a review petition on the apex court’s ruling.

In fact, VIL’s Rs 50,922 crore consolidated net loss for the second quarter (Q2FY20) is the highest ever borne by an Indian listed firm in a quarter, while Airtel’s net loss of Rs 23,450 crore is the company’s worst quarterly performance.

The SC, on October 24, had ruled that AGR included non-telecom receipts of telcos too and directed them to shell out a cumulative Rs 92,640 crore to the government within three months.

AGR is the basis on which license and spectrum usage charges (SUC) are calculated.

A perusal of the companies’ financial reports shows that Airtel and VIL have made provisions of Rs 28,450 crore and Rs 25,680 crore respectively towards meeting AGR liabilities in the absence of relief from the government.

“... our ability to continue as a going concern is dependent on obtaining the reliefs from the Government... and positive outcome of the proposed legal remedy,” VIL said, while Airtel noted that there was no assurance the management plans to access additional finance in time to meet AGR payments would succeed.

“This represents a material uncertainty... and accordingly, may cast significant doubt on the Group's ability to continue as a going concern,” Airtel said.

However, CEOs of both firms --  Gopal Vittal of Bharti Airtel and VIL’s Ravinder Takkar -- have said they remain hopeful of some relief from the government.

While a panel of secretaries headed by Cabinet Secretary Rajiv Gauba is currently looking into measures to relieve stress in the sector, including possible relief from the AGR liability, the Department of Telecom had sent all affected telcos notices on Wednesday asking them to self-assess liabilities and make payment within the SC’s stipulated timeframe.

Operational metrics puts Airtel ahead

While both have been pushed into record losses due to AGR provisions, their operational metrics are not very flattering either. Net losses before exceptional items stood at Rs 1,123 crore for Airtel and Rs 6,185 crore for VIL.

However, Airtel’s revenues and EBITDA levels have continued to improve steadily unlike VIL. While the former recorded consolidated revenue growth of 1.9 per cent and an EBITDA growth of 5.22 per cent in Q2FY20 compared to the previous quarter (Q1FY20), VIL has seen total revenues decline 3.8 per cent and 8.3 per cent respectively.

Stocks of both companies closed lower on Thursday, with VIL plunging over 20 per cent and Bharti Airtel declining 1.5 per cent on the bourses.