Voda Idea slips 26% in 2 days as Vodafone Plc rules out fresh fund infusion

Shares of Vodafone Idea (Vi) were slipped 18.5 per cent at Rs 6.03, hitting a fresh 52-week low on the BSE in the intra-day trade on Wednesday, after report suggested that Vodafone Group Plc has ruled out any further equity infusion in its debt-ridden telecom joint venture in India.

With today’s fall, the stock of the telecom services provider has tanked 26 per cent in two days after reports suggested Kumar Mangalam Birla has told the government that he is willing to give up promoter stake in the company.

The stock was trading at the lowest level since June 2020. It had hit a record low of Rs 2.61 in November 2019. At 12:44 PM, Vi was trading 13 per cent lower at Rs 6.43 on the BSE, as compared to a 0.95 per cent rise in the S&P BSE Sensex. The counter has seen huge trading volumes, with a combined 1,157 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

On the company’s plans to support Vi, which is struggling to raise fresh capital, the UK-based telecom major’s chief executive officer Nick Read, speaking during an investor conference call, said, “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”. His comments came on the day the Supreme Court dismissed Vi’s application for recomputation of adjusted gross revenue dues, Business Standard reported

Meanwhile, Birla has expressed willingness to offer his group’s 27 per cent stake in Vi to any government or domestic financial entity in order to keep the stressed telecom company alive.

The Aditya Birla Group chairman and promoter of Vi made the suggestion in a letter to Union Cabinet Secretary Rajiv Gauba on June 7. The Vi debt has more than trebled in the last four years to Rs 1.6 trillion as of the end of March 2021, from around Rs 37,000 crore in FY16. This includes deferred spectrum obligations and adjusted gross revenue (AGR) liabilities.

Analysts at ICICI Securities have ‘sell’ rating on Vi as the brokerage firm sees payment of liabilities coming soon, while fund availability remains a challenge. The efforts to raise funds have also not yielded any outcome yet.
“VIL’s weak liquidity position restricts its capability to invest in network improvement, as evident from its reducing capex intensity. The significant amount of cash required to service its debt, leaves limited upside opportunity for equity holders, despite the high operating leverage opportunity from any ARPU increase. The current low EBITDA would make it challenging to service debt without an external fund infusion,” analysts at Motilal Oswal Financial Services had said in the March quarter result update.