Vodafone Idea gains 14% on heavy volumes after crashing 21% a day before

Shares of Vodafone Idea (VI) moved higher by up to 14 per cent at Rs 13.50 on the National Stock Exchange (NSE) in Wednesday’s intra-day trade after the company's chief executive officer today said that the government has no desire to run the company or in appointing a board member.

On Tuesday, the stock of the telecom services provider had tanked 21 per cent to Rs 11.80 after the company said it agreed to convert interest on deferred statutory dues into equity. 

At 12:02 pm, VI was trading 11 per cent higher at Rs 13.10, as compared to a 0.74 per cent rise in the Nifty50. A combined 593 million equity shares, representing 2 per cent of total equity of the company had changed hands on the NSE and BSE.

"The government is very clear. They want us to run the company. They want the promoters to run the company," said Ravinder Takkar, managing director and chief executive officer of VI at a media conference on Wednesday. "I'm saying that based on personal conversation with the government." CLICK HERE FOR FULL REPORT

Meanwhile, VI’s board on Monday, January 10, 2022, had approved the conversion of interest for four years of deferment on the deferred spectrum installments and adjusted gross revenue (AGR) dues into equity, as per the telecom package.

This translates into Rs 16,000 crore net present value (NPV) of the interest getting diluted at Rs 10 per share, resulting in the government holding a 35.8 per cent stake in VI. Since this equity conversion pertains to the four years of deferment of payment, the overall liability will remain same after four years.

With 35.8 per cent stake, the government becomes the largest shareholder along with the largest creditor of the company. While, this step is on expected lines, Edelweiss Securities believe that the long term health of the company will depend on significant increase in average revenue per unit (ARPU). 

While, the telecom package has definitely provided temporary relief to the company, significant ARPU growth remains the most critical factor for the company’s long term viability. ARPU needs to increase to Rs 250 from its current Rs 109 over the next 3-4 years for it to sustain the leverage, the brokerage said.