With 65% fall, Voda Idea among worst performing Asia Pacific stocks in 2018

Stiff competition in the telecom sector has led to another rough year for the sector’s stocks. The shares of Vodafone Idea have been hit the hardest with the stock moving into the unenviable league of the worst-performing one in the MSCI Asia Pacific Index in 2018.

Last year, the shares of Vodafone Idea were down 65 per cent. Data compiled by Bloomberg shows the stock of the telecom major was among the top 5 losers in the regional index in local currency terms. According to analysts, despite the company’s fundraising plan, its balance-sheet is likely to remain under stress. 

“With a ballooning debt and inability to service it through operations, Vodafone Idea is on a fundraising spree. Yet, its net debt to Ebitda stands at around 26-times due to the estimated 70 per cent fall in Ebitda in FY19 versus FY16 (FY19 includes five months of Vodafone Idea merger),” analysts at Motilal Oswal Financial Services said. Ebitda (earnings before interest, tax, depreciation and amortisation) measures a company’s profits from its operations. 

Considering the proposed fundraise of Rs 25,000 crore and the company’s expected internal accruals for the next eight quarters, analysts estimate the company to have an overall cash of Rs 56,000 crore.  While this should be enough to cover the company’s combined capex and interest cost over the next eight quarters, analysts expect the firm’s net debt to still remain at high levels of Rs 1.4 trillion at the end of FY20. This would be 14 times the company’s projected FY20 Ebitda.