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Business News/ Markets / Stock Markets/  Vodafone Idea share price falls 14% after board approval to raise 45,000 crore
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Vodafone Idea share price falls 14% after board approval to raise ₹45,000 crore

Vodafone Idea said it will raise ₹20,000 crore through a combination of equity or equity-linked instruments and the rest via debt. The company’s promoters will also participate in the proposed equity raise.

Vodafone Idea share price has gained over 6% in one month, while the stock has risen more than 17% in three months. (Photo: Reuters)Premium
Vodafone Idea share price has gained over 6% in one month, while the stock has risen more than 17% in three months. (Photo: Reuters)

Vodafone Idea share price cracked 14% on Wednesday as the telecom operator’s board approved fundraising of up to 45,000 crore through equity and debt. Vodafone Idea shares declined as much as 14.93% to hit an intraday low of 13.50 apiece on the BSE.

Vodafone Idea said it will raise 20,000 crore through a combination of equity or equity-linked instruments and the rest via debt. The company’s promoters will also participate in the proposed equity raise.

The company will call for a meeting of its shareholders on April 2, 2024 and post-shareholder approval it expects to complete the equity fund raise in the coming quarter.

“In addition, the company remains actively engaged with its lenders for tying-up the debt funding, which will follow the equity fund raise. Through a combination of equity and debt, the company plans to raise around 45,000 crore," Vodafone Idea said in a release. 

Vodafone Idea’s bank debt currently stands at less than 4,500 crore, it added.

Read here: Vodafone Idea board approves 45,000 crore fundraise

Meanwhile, a report said that the company could raise funds through a follow-on public offering (FPO). Vodafone Idea may raise part of the 20,000 crore by selling fresh equity shares to the public and the remaining by issuing preference shares to promoter Aditya Birla Group CNBC-TV18 reported quoting sources with direct knowledge of the fundraising exercise.

“The equity and debt fund raising will enable the Company to make investments towards significant expansion of 4G coverage, 5G network rollout and capacity expansion. These investments will enable the Company to improve its competitive positioning and offer an even better customer experience," Vodafone Idea said.

The proposed fund raise follows a marked improvement in operating metrics. The Company has managed to grow its 4G subscriber base and ARPUs consecutively for the last 10 quarters, it added.

“With the proposed fundraise and the positive operational developments, the Company is confident of effectively competing in the market," it said.

Nuvama Institutional Equities sees Vodafone Idea’s fundraising move as a good beginning for the company, however, the contours of fund-raise remain unclear. 

Also, with overall debt of 2.5 lakh crore (including bank debt of 4,500 crore and Spectrum/ AGR dues of 2.1 lakh crore), the equity 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 continues to be in a precarious situation given its: high debt of 2.5 lakh crore; persistent subscriber losses; and inability to do 5G capex and upgrade the network. We continue to be negative on the stock. Our FY26 estimates do not yet include spectrum dues repayment as moratorium period ends. Our valuation too does not include the AGR dues," said Nuvama Equities.

It reiterated a ‘Reduce’ rating on Vodafone Idea with a target price of 7 per share.

Prashanth Tapse, Senior VP - Research, at Mehta Equities said that the approval for fundraising to 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 equity raise is good news for the long term. We also believe that these investments will also enable the company to improve its competitive positioning in this telecom sector and offer an even better customer experience and gain market share," said Tapse.

However, he believes the Vodafone Idea stock has already discounted the fundraising development and can see a limited upside up to 17 - 18 in best case scenario.

Vodafone Idea share price has gained over 6% in one month, while the stock has risen more than 17% in three months.

On Wednesday, Vodafone Idea shares closed 13.99% lower at 13.65 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 28 Feb 2024, 09:23 AM IST
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