Why has Templeton Mutual Fund written off its exposure to the debt paper of Vodafone? What does that mean for Bharti bonds?

You may recollect that on Thursday the Supreme Court refused any review of the AGR charges imposed by the DOT. According to the original SC order, the telecom companies had to pay Rs.147,000 crore to the DOT by way of AGR charges along with the interest and penalty payable. Earlier, the telecom companies had sought waiver of interest and penalty and moratorium on payment. However, that was struck down and the companies were asked to pay up by January 2020. With latest review petition also being struck down, the situation gets grim for these telecom companies. At least, Bharti has managed to raise $3 billion via QIPs which should cover part of its AGR costs but Vodafone is not in a position to raise that kind of money at short notice.

While Bharti has AGR dues to the tune of Rrs.28,000 crore, Vodafone Idea has a much larger liability of Rs.53,000 crore. Unless the company is able to garner these kind of resources at short notice, it has no choice but to default on these statutory commitments. That is the reason, Templeton has already marked down its exposure in Vodafone Idea debt in six of it is funds on concerns that the debt could see downgrade to default grade very soon if it is not able to rustle up the money.