Hopes that Vodafone Idea could outlive the financial squeeze due to the outstanding dues payments helped its shares gain as much as 23.5%, their best intraday gain since Jan. 21, after dropping more than 24% on Friday. The stock ended flat on Monday.
"While there is a concern that Vodafone is against the wall, there is a slim hope that they will get through," said Siddhartha Khemka, head of research at Motilal Oswal Financial Services in Mumbai.
Earlier on Monday, a lawyer for the company said Vodafone Idea would pay 35 billion rupees in dues to the government by Feb. 21. The lawyer declined to be named as the matter is still in court.
The Indian government last week ordered mobile carriers to immediately pay billions of dollars in dues after the country's top court threatened the companies and officials with contempt proceedings for failing to implement an earlier ruling.
Vodafone Idea, a venture between the Indian unit of Britain's Vodafone Group Plc and billionaire Kumar Mangalam Birla's Idea Cellular, said its board had approved a payment of 25 billion rupees to the government that would be made on Monday itself.
A further 10 billion rupees shall be paid before the end of the week, the company said.
Vodafone Idea also said its application on Monday to India's Supreme Court to direct the telecom department to refrain from taking "coercive steps" to recover the dues was "not entertained".
The company owes roughly $3.9 billion to the Indian government in dues, interest and penalties. The country's telecoms ministry did not respond to an email seeking comment.
Local rival Bharti Airtel Ltd said on Monday it had made a payment of 100 billion rupees towards the dues.
Analysts covering India's telecoms sector say Vodafone Idea is the most fragile of India's three major wireless carriers and if it shuts shop, the market would shape up as a duopoly of rivals Airtel and Reliance Industries' Jio.
Vodafone Idea has previously said its ability to continue as a business was contingent on the Supreme Court allowing it to modify issues such as payment timelines with the government.
By Suchitra Mohanty and Derek Francis