Vodafone Idea tumbles another 20% as company struggles to raise fresh funds

Our Bureau Mumbai | Updated on August 04, 2021

The share closed at a 52-week low of ₹5.94, down ₹1.46 or 19.73 per cent on the BSE.

Shares of Vodafone Idea crashed for the second straight day on the bourses on Wednesday, as the debt-ridden company runs out of options to raise fresh funds.

The stock tumbled nearly 20 per cent to record fresh lows on reports that Kumar Mangalam Birla, who owns about 27 per cent stake in the company, has offered to hand over his shareholding in the company to the government in exchange for a bailout package in a bid to keep the company afloat.

Vodafone Idea closed at a 52-week low of ₹5.94, down ₹1.46 or 19.73 per cent on the BSE. It had opened at ₹7.20 as against the previous close of ₹7.40.

On the NSE, it closed at ₹6, down ₹1.40 or 18.92 per cent. It hit a 52-week low of ₹5.95.

The company's shares have been under pressure since last month after the Supreme Court dismissed the applications filed by three telecom companies — Bharti Airtel, Vodafone Idea and Tata Teleservices who had appealed to the apex court to allow them to make staggered AGR payments. They had also sought correction to calculation errors made by the Department of Telecommunication (DoT) in its AGR demand.

The decision has come as a big blow to the cash strapped Voda Idea which owes over ₹58,000 crore in AGR dues.

“I am more than willing to hand over my stake in the company to any entity — public sector/government/domestic financial entity — that the Government may consider worthy of keeping the company going,” Birla said in a letter addressed to Rajiv Gauba, Cabinet Secretary of India as previously reported by BusinessLine.

Vodafone Idea has been reeling under a massive debt of nearly ₹1.8-lakh crore and a cash balance of only ₹350 crore.

The group has invested over ₹12,200 crore in the telecom business over the last 20 years. Birla also has indirect control over Vodafone Plc’s 44 per cent in the joint venture company.

Furthermore, Vodafone Group Plc Chief Executive Officer Nick Read in a conference call with investors last month said that India was a question for Vodafone Idea, refusing to put more equity into India.

"We as a group try to provide them as much practical support as we can, but I want to make it very clear, we are not putting any additional equity into India," Read said.

The UK-based Vodafone Plc has written off nearly $12 billion in various phases, on account of its Indian investments, both in Vodafone India and after its merger with Idea Cellular.

Vodafone Idea has been trying to raise funds from investors over the last year but has not been able to close a deal. Birla said foreign investors are keen to partner with Vodafone Idea, but want to see a clear government intent to have a three-player telecom market.

The company's future is in limbo without fresh investments as it has also not been able to invest in future network roll-outs.

Brokerages have also remained wary on the stock. Yes Securities had given it a Reduce rating last month with a target price pf ₹8 post its Q1 FY 2022 results, seeing a downside of 9 per cent.

ICICI Securities had given it a Sell rating with a target price of ₹5.

“VIL remains the weakest private telco. AGR dues payment extension was only a short-term breather and its survival hinges on quick capital infusion and tariff hike/floor tariff implementation. The need for capitalisation is urgent mainly due to its upcoming payment commitments, lagging spends on network and continued relative market share loss,” it had said.

Published on August 04, 2021

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