Vodafone Idea Limited is a leading telecommunications company in India. It was formed in 2018 as the result of a merger between Vodafone India and Idea Cellular.
The company offers a wide variety of products and services, including mobile voice and data services, broadband, and digital TV.
It operates in over 20 circles across India and serves over 400 million customers.
Vodafone Idea is headquartered in Mumbai and is one of the largest telecommunications companies in India, both in terms of network size and subscriber base.
Shares of Vodafone Idea (Vi) rallied over 24% in intraday trade on Monday after the government finally agreed to convert the telco’s accrued interest into financial equity, which will assist the cash-strapped business in paying vendor dues and refinancing its current bank debt.
The stock got the upper hand, and due to this, the government’s decision to rescue the telecom operator by converting its interest on dues into equity has revived investor interest in the debt-laden telecom operator.
The Department of Telecommunications (DoT) charges wireless carriers an Adjusted Gross Revenue (AGR) fee, or usage and licensing fee, totaling $16,000 crore, for which the Center approved the conversion of Vodafone Idea into capital shares.
On Friday, making the government the company’s largest shareholder.
The action was taken after the Aditya Birla Group (ABG) gave the government a promise that it would raise the necessary money.
As part of the debt-to-equity conversion plan, the company will give the government 1,613.18 crore share capital for $10 per share, a 35% premium over Friday’s BSE closing price of $6.89.
As a result, the government will become the majority shareholder in the company, holding a stake of about 33%.
Aditya Birla Group and Vodafone Plc, two members of the promoter group, currently have 74.99% of the company, with the public holding 25.01% of the shares as of December 31, 2022. The promoter’s shareholding will be reduced to 50% following this transaction.
As a result of the positive news, the share price of Vodafone Idea increased by 9.9% to 7.57 from its previous closing price of 6.89 on the BSE.
The telecom stock increased 24.4% to reach an intraday high of $8.57, extending opening gains, and the market capitalization increased to $26,948 crore.
When compared to the two-week average volume of 332 lakh stocks, the counter experienced an increase in the volume of 1,500 lakh shares. In contrast, the BSE Sensex was down 440 points, trading at 60,400.
Shares of VI are currently 27% below their 52-week high of 11.81, reached on February 4, 2022, and 27% below their 52-week low of 6.33, reached on January 27, 2023.
The stock’s negative return over the past year was 23%, while its six-month decline was 3%. The stock has increased more than 8% in the past month while rising 22% in a single week.
Vi is severely short on cash to cover vendor bills and the rollout of 5G. As part of the telecom relief package, the board of VIL decided to convert the interest on its debt along with equity about a year ago.
For its capital expenditures, the rollout of 5G, and vendor payments, the company sought to raise 20,000 crores through a combination of debt and equity.
Aditya Birla Group and Vodafone Plc, the sponsors have already committed about 5,000 crores.
Given that the telecom operator has accumulated losses totaling Rs 1.6 lakh crore over the last four fiscal years, raising money is still very important for the company’s competitiveness.
As of September 30, the gross debt (excluding lease liabilities) was 2.2 lakh crore, consisting of debt from banks and other financial institutions of 15,080 crore and deferred spectrum obligations to pay 1,37 lakh crore, including 17,260 crores for spectrum bought in the most recent wireless spectrum auction and AGR liabilities of 68,590 crores owed to the government.
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