Vodafone Idea's share price fell further after the telecom operator's board approved up to ₹45,000 crore in stock and debt borrowing. Vodafone Idea shares fell as high as 9.95% to ₹14.29 on the BSE.
Vodafone Idea plans to raise ₹20,000 crore through equity and equity-linked instruments, with the remaining funds coming from debt. The company's promoters will also take part in the proposed equity raise.
The company will have a shareholder meeting on April 2, 2024, and hopes to complete the equity fund raise in the coming quarter.
According to a release, "In addition, the company is actively engaging with its lenders to finalize the loan fundraising, which will follow the equity fund raise. Vodafone Idea wants to fund approximately ₹45,000 crore through equity and debt."
Vodafone Idea now has bank debt of less than ₹4,500 crore, according to the company.
"The stock and loan fund raising will allow the company to invest in major expansion of 4G coverage, 5G network rollout, and capacity expansion. These investments will allow the Company to improve its competitive position and provide an even better customer experience," Vodafone Idea stated.
The proposed cash increase comes after a significant improvement in operational indicators. The company has been able to grow its 4G subscriber count and ARPUs consistently over the last ten quarters, it noted.
"With the proposed fundraise and the positive operational developments, the Company is confident of effectively competing in the market," according to the statement.
Nuvama Institutional Equities views Vodafone Idea's fundraising move as a positive start for the company; nonetheless, the specifics of the fund-raise remain unknown.
With a total debt of ₹2.5 lakh crore (including bank debt of ₹4,500 crore and Spectrum/AGR dues of ₹2.1 lakh crore), Nuvama Equities believes the equity issue will have a modest financial impact.
VIL's financial status is hazardous due to large debt of ₹2.5 lakh crore, ongoing subscriber losses, and inability to invest in 5G technology and improve the network. We remain pessimistic on the stock. Our FY26 forecasts do not yet include spectrum dues payback when the moratorium period ends. Nuvama Equities stated that its value does not include AGR dues. The company maintained a 'Reduce' rating for Vodafone Idea, with a target price of ₹7 per share.
Prashanth Tapse, Senior VP - Research at Mehta Equities, stated that Vodafone Idea's financing permission is urgently required for immediate expansion of 4G coverage, 5G network rollout, and capacity expansion.
"The announcement that promoters will also participate in the anticipated equity offering is good news in the long run. We also believe that these investments will help the company enhance its competitive position in the telecom sector, provide an even better customer experience, and increase market share," Tapse stated.
However, he feels the Vodafone Idea stock has already discounted the fundraising development and can see a limited upside of up to ₹17-18 in the best case scenario.
Vodafone Idea's stock price has grown more than 6% in a month, and more than 17% in three months. At 10:40 a.m., Vodafone Idea shares were trading 9.89% down at ₹14.30 per on the BSE.
