Telecom Operator Vodafone Idea recently sought emergency funds of at least ₹ 7,000 crores from local banks, according to reports. It approached the State Bank of India, Punjab National Bank, HDFC Bank and IDFC First Bank amongst others. However, lenders could wait for capital infusion by its promoters— India’s Aditya Birla Group and UK’s Vodafone Plc, or they could waid for equity conversion by the government.
Vodafone Idea’s shares hit a 52-week low of ₹ 7.15 apiece on the National Stock Exchange (NSE) on Wednesday. The company’s shares have been reeling under pressure for quite a few years now. Its share price eroded investors’ money as it fell by 41.80% in the past year and by 88.64% in the past five years.
Global Brokerage CLSA, in its outlook on the telecom sector recently said that 2023 will be a decisive year for the company. Its financial crisis has not been averted, with delays in fundraising and pending conversion of four years’ interest on spectrum and AGR (Adjusted Gross Revenue) payment into equity for the government.
According to its report, Bharti Airtel and Jio together control a 77 percent market share and they will continue to gain.
Vodafone Idea has a debt of more than ₹ 2,00,000 crores. Telecom minister Ashwini Vaishnaw said that the conversion of equity alone would not solve the company’s financial problems. He added that it needs a capital injection from multiple sources.
In its latest report, JP Morgan said that Vodafone Idea is its key avoid in the telecom sector, given significant leverage and continued market share losses. The company has struggled to keep pace with 4G transitions, as compared to Jio and Airtel over the last three years.
“Its higher regulatory payouts from the judgement in the AGR case and higher spectrum outgo (post-moratorium) also limit its ability to invest in the network for coverage and capacity” JP Morgan added.
JP Morgan has maintained its underweight rating on the share with a target price of ₹ 3 per share. This indicates a down side of 59.73% as compared to the Vodafone Idea’s closing price of ₹ 7.45 on Wednesday.
Written by Simran Bafna
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