Vodafone Idea Shares Rise: Shares of Vodafone Idea rallied 10 per cent after the telecom services provider is reportedly seeking to revitalize its business by injecting approximately Rs 14,000 crore in equity. The stock opened at Rs 8.48 per share on BSE, marking an impressive 10 per cent increase from the previous close.
According to media reports, Vodafone Idea intends to infuse Rs 14,000 crore in the near future. The existing promoters, Aditya Birla Group and UK-based Vodafone Group, are expected to contribute around half of the total amount, an ET report stated, quoting people in the knowledge of the development.
The report suggests that Aditya Birla Group and Vodafone will inject Rs 2,000 crore as fresh equity into the company, while an additional Rs 7,000 crore will be raised from external investors.
Following the government’s announcement of a revival package for telecom players in September 2021, the promoters have already invested approximately Rs 5,000 crore in the company. Notably, Kumar Mangalam Birla, the chairman of the Aditya Birla Group, made a comeback to the company’s board in April 2023 after a hiatus of 20 months. Aditya Birla Group owns a significant 32 percent stake in Vodafone Idea Ltd.
In February 2023, the government approved the conversion of interest dues worth over Rs 16,133 crore of Vodafone Idea into equity shares with a face value of Rs 10 each. This relief was part of the reform package introduced by the government in September 2021.
Vodafone Idea has been grappling with a loss of subscribers, as its competitors Reliance Jio and Bharti Airtel have already launched 5G services in India. Since April 2021, Vodafone Idea has witnessed a decline of over 4.24 crore subscribers.
Vodafone Idea shares in the last one month have surged nearly 15 per cent as compared to about a 2 per cent rise in the Nifty50 during the same period.
Year-to-date, the stock is down 8.5 per cent as against almost 3 per cent surge in the benchmark index.
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Motilal Oswal said quoting Telecom Regulatory Authority of India data, “The telecom industry grew by 1.4 per cent quarter-on-quarter (QoQ) in March quarter of FY23, led by ARPU (average revenue per user) growth of 1.5 per cent QoQ against average 3 per cent QoQ growth in the last 8 quarters.”
Industry subscriber growth was flat, indicating the underlying trend of consolidation of dual sim cards in the market, and upgrade from 2G to 4G, the domestic brokerage added.
Vodafone Idea gained 120 basis points market share in Mumbai to 24.7 per cent, partly attributed to the decrease in the 2G validity plan to 15 days from 28 days, gaining 7 per cent higher ARPU QoQ.
“The significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any ARPU increase,” the domestic brokerage said in its valuation note on Vodafone Idea.
The current low EBITDA will make it challenging for the company to service the debt without an external fund infusion, Motilal Oswal said, retaining a ‘neutral’ stance on the stock with a target of 7 apiece.
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