Shares of this leading telecom stock plunged over 9 percent after the Department of Telecommunications (DoT) issued a notice to the company regarding the non-payment of bank guarantees required to cover past spectrum auction dues.
Share Price Movement
In Monday’s trading session, Vodafone Idea Limited’s share price fell 9.09 percent to an intraday low of Rs.8.9 per share from its previous close of Rs.9.79 apiece. The price has since recovered and is now trading at Rs.9.19 per share.
Reason for the Decline
Today’s sharp decline in stock price followed reports that the Department of Telecommunications (DoT) has issued a notice to Vodafone Idea for failing to submit the required bank guarantees related to past spectrum auction dues, as reported by CNBC Awaaz.
This notice arises amid ongoing discussions between the DoT and the finance ministry regarding the potential waiver of the bank guarantee requirement, although no final decision has been made.
The notice was reportedly issued because the joint venture between the UK’s Vodafone Group and India’s Aditya Birla Group did not provide the necessary bank guarantees on time for spectrum dues from auctions conducted before 2022.
A source revealed that the Department of Telecommunications (DoT) has requested Vodafone Idea to submit bank guarantees that were due in September. The moratorium on spectrum auction dues for Vi ends in September 2025, and the company must provide guarantees worth over Rs.24,700 crore.
Target Recommendation
Goldman Sachs has issued a ‘sell’ recommendation for Vodafone Idea Ltd., with a price target of Rs. 2.5 per share, indicating a potential decline of over 80 percent from Thursday’s closing price.
Financial Performance
In its latest financial update, Vodafone Idea reported net sales of Rs.10,508 crore for Q1 FY25, a 1.4 percent decrease from Rs.10,656 crore in the same quarter last year.
The company’s net losses for the quarter were Rs.6,432 crore, down from Rs.7,840 crore in Q1 FY24. However, the overall financial performance remains weak, reflecting continued financial struggles.
Company Overview
Vodafone Idea, known as Vi, is an Indian telecommunications company created by the merger of Vodafone India and Idea Cellular in August 2018. Headquartered in Mumbai and Gandhinagar, Vi is the third-largest mobile operator in India, with approximately 219 million subscribers as of April 2024.
Written by – Siddesh S Raskar
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