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Vodafone Idea’s share price extended its decline after opening sharply lower on Wednesday, as the telecom operator’s board of directors approved fundraising of up to $45,000 crore through equity and debt. Vodafone Idea shares fell up to 9.95% $14.29 each on the BSE.
Vodafone Idea said it will increase $20,000 crore through a mix of equity or equity-linked instruments and the rest through debt. The company’s promoters will also participate in the capital increase proposal.
The company will convene a shareholder meeting on April 2, 2024 and, following shareholder approval, expects to complete the equity fundraising in the next quarter.
“In addition, the company continues to actively engage with its lenders to lock in debt financing, which will follow the equity fundraising. Through a combination of equity and debt, the company plans to raise around $45,000 crore,” Vodafone Idea said in a statement.
Vodafone Idea’s bank debt currently stands at less than $4,500 crore, he added.
Read here: Vodafone Idea board approves $Fundraising of Rs 45,000 crore
“The equity and debt fundraising will enable the Company to make investments for significant expansion of 4G coverage, 5G network rollout and capacity expansion. These investments will enable the Company to enhance its competitive positioning and deliver an even better customer experience,” Vodafone Idea said.
The proposed fundraising follows a marked improvement in operating metrics. The company has managed to increase its 4G subscriber base and ARPUs consecutively for the last 10 quarters, he added.
“With the proposed fundraising and positive operational developments, the company is confident of competing effectively in the market,” he said.
Nuvama Institutional Equities sees Vodafone Idea’s fundraising initiative as a good start for the company; However, the contours of fundraising remain unclear.
Furthermore, with a global debt of $2.5 crores (including bank debt of $4,500 crores and Spectrum/AGR dues of $2.1 crore), the capital raise is likely to have limited financial impact, Nuvama Equities said.
Also read: Zee sets up panel to probe regulator’s allegations against company, promoters
“Overall, VIL remains in a precarious situation given its: high debt $2.5 lakh crores; persistent subscriber losses; and inability to undertake 5G capital expenditures and network upgrades. We remain negative on the stock. Our FY26 estimates do not yet include payment of spectrum dues when the moratorium period ends. Our valuation also does not include AGR dues,” Nuvama Equities stated.
Reiterated ‘Reduce’ rating on Vodafone Idea with a price target of $7 per share.
Prashanth Tapse, senior vice president of research at Mehta Equities, said the approval of fundraising for Vodafone Idea is the need of the hour for immediate expansion to 4G coverage, 5G network rollout and capacity expansion.
“The news that promoters will also participate in the proposed capital increase is good news in the long run. We also believe that these investments will also enable the company to enhance its competitive positioning in this telecom sector and deliver even better customer experience and gain market share,” Tapse said.
However, he believes Vodafone Idea shares have already priced in the fundraising development and may see limited upside until $17 – 18 at best.
Vodafone Idea share price has gained more than 6% in a month, while the stock has risen more than 17% in three months.
At 10:40 am, Vodafone Idea shares were trading 9.89% lower on $14.30 each on the BSE.
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Disclaimer: The opinions and recommendations above are those of individual analysts or brokerage firms, and not those of Mint. We advise investors to consult certified experts before making any investment decisions.
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