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
“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.
“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.
At 9:20 am, Vodafone Idea shares were trading 0.32% lower at ₹15.82 apiece on the BSE.
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Published: 28 Feb 2024, 09:23 AM IST