Vodafone Idea, a major player in the Indian telecom industry, saw its shares plummet by as much as 12 percent on February 28th. This drop occurred even after the company’s board of directors announced plans to raise a substantial amount of funds totaling Rs 45,000 crore. The move was aimed at addressing the financial challenges faced by the cash-strapped telecom operator. Despite this effort, brokerages expressed caution, suggesting that the fundraising alone might not be sufficient to turn the company’s fortunes around, especially as it risks missing out on opportunities in the 5G sector.
The company disclosed its intention to raise Rs 20,000 crore through a mix of equity or equity-linked instruments, with the remainder to be sourced through debt. Additionally, the promoters of Vodafone Idea also pledged to participate in the proposed fundraising endeavor. Despite these efforts, brokerages like Nomura maintained their ‘reduce’ calls on the stock, setting a target price of Rs 6.5.
At 10.50 am on February 28th, Vodafone Idea shares were trading at Rs 14 on the National Stock Exchange (NSE). The company plans to convene a shareholder meeting on April 2nd to seek approval for the proposed equity fundraising, with expectations to conclude the process in the following quarter.
While Vodafone Idea cited improvements in its operating metrics, including consecutive growth in its 4G subscriber base and Average Revenue Per User (ARPU) for the last 10 quarters, concerns about its financial viability persist. In the third quarter of the fiscal year 2023-24, the telecom operator reported a net loss of Rs 6,985.9 crore, although this represented a slight decrease compared to the same period in the previous year. Revenue, however, saw a marginal increase, reaching Rs 10,673.1 crore.
Vodafone Idea operates as a joint venture between the Aditya Birla Group and Vodafone Group, offering voice and data services across various platforms including 2G, 3G, and 4G throughout India.
Despite these efforts, investors remain wary of the company’s prospects, as it continues to face significant challenges in a rapidly evolving telecommunications landscape.
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