Vodafone Idea Limited has executed a revised Implementation Agreement with Vodafone Group promoters to recover money linked to liabilities from the merger of Vodafone India and Idea Cellular. The company announced this development following board approval on Wednesday for the amendment to the contingent liability adjustment mechanism (CLAM) worth approximately ₹5,836 crores.

Background of the CLAM Mechanism

The mechanism was originally established during the merger of Vodafone India and Idea Cellular to settle any legal, tax or regulatory liabilities that might arise later from the two companies' past operations. The original Implementation Agreement was dated March 20, 2017, and the recent amendment records the discharge of the CLAM arrangement. Under this mechanism, Vodafone Idea had recorded up to ₹8,369 crores as money receivable from the Vodafone Group, with ₹1,975 crores already paid, leaving a balance for recovery.

Revised Recovery Structure

The amended agreement establishes a dual recovery mechanism combining immediate cash payments and long-term equity security:

The recovery will happen in two distinct phases. First, the Vodafone Group promoters will pay ₹2,307 crores in cash over the next 12 months in accordance with the terms agreed in the amended agreement. Second, certain Vodafone Group shareholders will set aside 3.28 billion Vodafone Idea shares for five years.

Share-Based Security Mechanism

The earmarked shares provide additional security for the recovery amount. These shares can be sold at the company's direction, and the proceeds will go directly to Vodafone Idea. At current market prices, these shares are valued at around ₹3,529 crores, providing substantial security for the outstanding amount.

Financial and Regulatory Impact

Vodafone Idea emphasized that the revised structure improves visibility on future cash inflows and strengthens its financial position. The company also clarified an important regulatory aspect - it does not need to make any payments to the Department of Telecommunications in order to receive this money from the CLAM mechanism.

The transaction represents a modification to an existing related party transaction, given the promoter group relationship between the parties. This arrangement enhances predictability around future cash flows through the combination of immediate cash recovery and long-term equity security mechanisms, providing a structured approach to resolving the outstanding merger-related liabilities.

Vodafone Idea continues to await official communication from the government regarding reported AGR relief measures, even as market speculation about the package triggered significant volatility in the company's shares. The telecom operator has officially clarified that it has not received any government communication regarding the reported measures, creating uncertainty about the actual status of relief.

Government Relief Package Details

According to government sources, the Union Cabinet has decided to freeze Vodafone Idea's AGR dues at ₹87,695.00 crore as of December 31, 2025, instead of providing a waiver. The payment schedule has been restructured, with dues now payable over a longer timeframe.

The frozen AGR dues will be reassessed by the Department of Telecom based on Deduction Verification Guidelines and audit reports. A government-appointed committee will make the final decision, which will be binding on both parties. The Department of Telecommunications is expected to form this reassessment committee within six to eight months.

Significant Market Reaction

Vodafone Idea's shares experienced dramatic volatility following the relief package reports. After reaching a 52-week high during the trading session, the stock plummeted to hit the lower circuit limit within minutes of the media reports.

Company's Official Response

Following stock exchange queries about the price movement, Vodafone Idea issued a clarification under SEBI regulations. The company stated: "We have not received any communication from the Government in relation to the above reported matter. As and when there is any development which requires disclosure, we will do the needful."

Market Expectations vs Reality

The market reaction reflects disappointment with the relief package structure. Markets had been expecting an AGR waiver of at least 50.00%, which could have significantly improved the cash-strapped telecom operator's long-term prospects. Instead, the freeze mechanism maintains the liability while extending payment timelines.

The central government's 49.00% equity stake in Vodafone Idea, which serves over 20 crore customers in India, adds complexity to the relief discussions. The company's stock has gained 38.00% year-to-date despite recent volatility, though analyst sentiment remains mixed with an average 12-month consensus price target of ₹8.96.