Tata Sons may bank on TCS to clear teleservices’ AGR dues

Tata Sons has started the process of arranging funds for paying off the statutory dues of Rs 13,823 crore owed by Tata Teleservices, top officials close to the development said. It will most likely bank on group flagship TCS for sourcing funds in case it has to pay the dues immediately, an official privy to the matter said.

The move comes even as the Supreme Court is scheduled to hear modification petitions filed by telcos after the court upheld the government’s broad definition of telecom service providers’ adjusted gross revenues (AGR) based on which their levies and spectrum charges are calculated.

The steel to salt conglomerate is upset over the impact of this payout demand. “But we are realistic of the importance to have a payment plan in place,” one of the officials said.


Tata Sons declined to comment.

If the top court allows telcos to negotiate with the telecom department (DoT) then the timeline for payment may get extended, and the Tata group company may not have to rush into clearing the AGR dues. Otherwise, it may have to make the payment immediately as the deadline fixed by the top court ended on January 23.

Top officials close to the development said the issue has been much debated by the holding company which is closely monitoring the capital allocation and return on capital of operating companies.

“It is an unreasonably huge amount, but we are aware that we have a reputation to protect of paying off every single due owed by group companies,” a group official said. “The Tata Sons board had also discussed various scenarios to best handle the financial impact when they last met before the NCLAT order in end 2019.”

The holding company's finance team is handling the discussions on other possible avenues of raising funds to deal with the crisis that has come in a challenging business environment. For the group this is a double whammy of sorts, coming at a time when the Tata Trust is fighting another legal battle with the income tax department.

The group is also worried about the impact of the payment on its balance sheets.

“Our worries are also over the kind of impact it has have on business decisions of foreign investors,” a top official said on condition of anonymity. “How does (the group) focus on sensible capital allocation on growth when we continued to be distracted by industry legacy issues?”

To deal with such issues, the group is increasingly depending on the profits from TCS that has a market cap of Rs 8.2 lakh crore as of Tuesday.

“This is really a major concern for us,” said another senior group executive. “We chose to do the right thing and paid off Docomo and the banks so that we would close issues that would distract. Such issues keep distracting us from giving complete attention to the other challenges that we are also facing.”

The Docomo and Tata fight was a three-year tussle in which the Delhi High Court in 2017 allowed Tata Sons to pay NTT Docomo a $1.17 billion arbitration award upon termination of their telecom joint venture. The group paid Docomo in October same year.

Tata Teleservices, along with Vodafone Idea and Bharti Airtel, had filed review petitions before the Supreme Court against its earlier verdict on AGR dues. That petition was dismissed, following which the three went for modification applications. Vodafone Idea and Bharti Airtel face statutory dues of Rs 53,039 crore and Rs 35,586 crore, respectively.

The tussle between telcos and government over AGR dues concluded on October 24, 2019 when the top court upheld the government’s definition.

Although the deadline has gone, DoT has directed its circle offices not to take any coercive action against the telcos till the Supreme Court’s decision on the modification appeal.