Vodafone Idea Shares Drop Despite Planned Rs 45,000 Crore Fundraise

Vodafone Idea Share

Vodafone Idea, India’s struggling telecom operator, witnessed its shares plunge 12% on February 28th, despite announcing a massive Rs. 45,000 crore fundraising plan by its board of directors. This news raises concerns about the company’s future, even with the planned financial injection.

What are the thoughts of analysts?

Market analysts remained cautious, expressing doubts over the fundraiser’s ability to single-handedly save Vodafone Idea. The company’s inability to participate in the 5G rollout further adds to the uncertainty.

“Vodafone Idea Ltd will not be fully out of the woods, in our view,” stated Nomura, a brokerage firm, maintaining its “reduce” rating on the stock and setting a target price of Rs. 6.5.

The company’s plan involves raising Rs. 20,000 crore through a combination of equity or equity-linked instruments, with the remaining Rs. 25,000 crore coming from debt. Promoters are also expected to participate in the fundraising process.

Despite the announcement, brokerages remained apprehensive. “If VIL is able to tie up the entire fundraise, it will be a material positive; however, VIL will not be fully out of the woods, in our view,” reiterated Nomura.

Vodafone Idea plans to hold a shareholder meeting on April 2nd, 2024. Following shareholder approval, the company expects to complete the equity fundraising process within the upcoming quarter.

While the share price dropped on February 28th, settling at Rs. 16.1 on the NSE, it has still gained 5.2% since news of the potential fundraise emerged on February 22nd.

The company highlighted its improved operational metrics in a filing to the stock exchanges, citing consecutive growth in its 4G subscriber base and Average Revenue Per User (ARPU) over the past ten quarters.

Conclusion

Vodafone Idea, a joint venture between Aditya Birla Group and Vodafone Group, offers pan-India voice and data services across 2G, 3G, and 4G platforms. However, its financial struggles and lack of 5G infrastructure raise questions about its long-term viability in the competitive Indian telecom market.