Shares of Vodafone Idea (Vi) rallied over 24% in intraday trade on Monday after the government finally agreed to convert the telco’s accrued interest into equity, which will help the cash-strapped company to refinance its existing bank debt and pay vendor dues. The stock got a boost as the government’s decision to rescue the telecom operator by converting its interest on dues into equity has revived investor interest in the debt-laden telecom operator.
The Centre on Friday allowed Vodafone Idea to convert its Adjusted Gross Revenue (AGR) dues, the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT), worth ₹16,000 crore into equity shares, which made the government the largest stakeholder in the company. The move came after the government received assurance from the Aditya Birla Group (ABG) to bring in necessary funds.
As part of the debt-equity conversion plan, the company will issue 1,613.18 crore equity shares at an issue price of ₹10 each to the government, up 35% compared to Friday’s closing price of ₹6.89 on the BSE. As a result, the government will become the largest shareholder in the company with around 33% stake. At present, the promoter group entities, including Adity Birla Group and Vodafone Plc, hold a 74.99% stake in the company, while public shareholding is at 25.01% as of December 31, 2022. Post this transaction, the promoter's shareholding will come down to 50%.
Cheering the news, Vodafone Idea share price opened 9.9% higher at ₹7.57, against the previous closing price of ₹6.89 on the BSE. Extending opening gains, the telecom stock surged 24.4% to hit an intraday high of ₹8.57, while the market capitalisation rose to ₹26,948 crore. The counter saw spurt in volume as 1,500 lakh stock changed hands over the counter as compared to the two-week average volume of 332 lakh stocks. In comparison, the BSE Sensex was trading 440 points lower at 60,400 levels.
Vi shares currently trades 27% lower than its 52-week high of ₹11.81 touched on February 4, 2022, while it hit a 52-week low of ₹6.33 on January 27, 2023. The stock has given a negative return of 23% in a year, while it fell 3% in six month period. In the last one month, the stock has gained over 8%, while it rose 22% in a week.
Vi is severely in shortage of capital to make vendor payments and the 5G rollout. It was about a year back, the board of VIL opted to convert the interest on its dues into equity as part of the telecom relief package. The company wanted to raise ₹20,000 crore via a mix of debt and equity, for its capital expenditure, 5G rollout and vendor payments. The promoters-- Aditya Birla Group and Vodafone Plc-- have already infused about ₹5,000 crore. Fundraising remains critical for the company’s competitiveness as the telecom operator has accumulated losses to the tune of ₹1.6 lakh crore in the last four financial years.
The net debt (excluding lease liabilities) stood at ₹2.2 lakh crore as of September 30-- comprising of deferred spectrum payment obligations of ₹1.37 lakh crore (including ₹17,260 crore towards spectrum acquired in the recent spectrum auction and AGR liability of ₹68,590 crore that are due to the government, and debt from banks and financial institutions of ₹15,080 crore.
