Vodafone Idea has announced plans to secure ₹20,000 crore through a mix of equity or equity-linked instruments, with the remaining amount to be sourced through debt financing. Notably, the company’s promoters are set to partake in the proposed equity infusion.
The downward trend in Vodafone Idea’s share price continued on Wednesday, with the telecom operator’s stock opening significantly lower. This decline was spurred by the board’s approval of a fundraising initiative totaling up to ₹45,000 crore through a combination of equity and debt. Vodafone Idea shares experienced a notable drop, falling by as much as 9.95% to reach ₹14.29 per share on the Bombay Stock Exchange (BSE).
Vodafone Idea has revealed plans to raise ₹20,000 crore through a blend of equity or equity-linked instruments, with the remaining sum to be sourced through debt financing. Notably, the company’s promoters are set to partake in the proposed equity infusion.
Vodafone Idea has announced that it will convene a shareholder meeting on April 2, 2024, with expectations to finalize the equity fundraising in the subsequent quarter pending shareholder approval. The company also disclosed its ongoing efforts in collaborating with lenders to secure debt funding, anticipated to follow the equity fundraising. Vodafone Idea aims to raise approximately ₹45,000 crore through a combination of equity and debt, as stated in a release.
Vodafone Idea further clarified that its current bank debt amounts to less than ₹4,500 crore.
Vodafone Idea emphasized that the upcoming equity and debt fundraising endeavors will empower the company to embark on significant expansions in 4G coverage, initiate the rollout of 5G networks, and enhance capacity. These investments are anticipated to bolster the company’s competitive stance and elevate the overall customer experience, according to Vodafone Idea’s statement.
The decision to pursue this fundraising initiative comes on the heels of notable improvements in the company’s operating metrics. Vodafone Idea highlighted its consistent growth in 4G subscriber base and Average Revenue Per User (ARPU) for the past ten consecutive quarters.
Buoyed by these positive operational developments and the forthcoming fundraise, the company expressed confidence in its ability to effectively compete in the market.
Nuvama Institutional Equities views Vodafone Idea’s fundraising initiative as a positive start for the company, but notes that specific details regarding the fundraising plan are still unclear. Additionally, considering the company’s substantial overall debt amounting to ₹2.5 lakh crore, which includes ₹4,500 crore in bank debt and ₹2.1 lakh crore in Spectrum/AGR dues, Nuvama Equities suggests that the equity raise is expected to have a limited financial impact.
Nuvama Equities reiterated its cautious stance on Vodafone Idea Limited (VIL), highlighting the company’s precarious position due to various factors. These include its substantial debt burden amounting to ₹2.5 lakh crore, ongoing subscriber losses, and challenges in conducting capital expenditure for 5G deployment and network upgrades. The firm remains pessimistic about the stock’s performance, emphasizing that their FY26 estimates do not currently incorporate spectrum dues repayment as the moratorium period concludes. Furthermore, Nuvama Equities mentioned that their valuation does not encompass the AGR (Adjusted Gross Revenue) dues, underscoring the complex financial challenges faced by Vodafone Idea.
Nuvama Equities reaffirmed its ‘Reduce’ rating on Vodafone Idea and set a target price of ₹7 per share.
Prashanth Tapse, Senior VP – Research at Mehta Equities, emphasized the importance of the fundraising approval for Vodafone Idea, stating that it is crucial for immediate expansion in 4G coverage, 5G network rollout, and capacity expansion.
Tapse also welcomed the news of the company’s promoters participating in the proposed equity raise, considering it a positive development for the long term. He believes that these investments will enhance the company’s competitive positioning in the telecom sector, leading to an improved customer experience and increased market share.
However, Tapse cautioned that the Vodafone Idea stock may have already factored in the fundraising news and anticipates a limited upside potential, estimating it to be around ₹17 – ₹18 per share in the best-case scenario.
Despite recent gains, Vodafone Idea’s share price has seen a notable increase of over 6% in the past month and more than 17% in the last three months.
As of 10:40 am, Vodafone Idea shares experienced a significant drop, trading 9.89% lower at ₹14.30 apiece on the Bombay Stock Exchange (BSE).
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