Vodafone Idea hits new low as CRISIL downgrades its NCDs rating

Shares of Vodafone Idea hit a new record low of Rs 5.13, down 9 per cent on the BSE on Wednesday after CRISIL downgraded its rating on non-convertible debentures (NCDs) of Rs 3,500 crore to 'CRISIL A/Negative' from 'CRISIL A+/Negative'.

The ratings agency noted that the rating revision is on account of deterioration in the company's business and financial risk profile over the medium-term due to lower profitability than expected, although significant synergy benefits were accrued ahead of the earlier plan.

Despite the company’s deleveraging plans, net debt may continue to exceed Rs 1 trillion by the end of March 31, 2020, CRISIL said in rating rationale.

Vodafone Idea plans to monetise its 11.15 per cent stake in Indus Towers, post completion of the Bharti Infratel and Indus Towers merger. The proceeds from this transaction is estimated at about Rs 5,630 crore as on June 30, 2019. Besides, the company is also looking to sell its fibre assets.

“While the competitive intensity in the Indian telecom industry has moderated over the past few months, the credit risk profile of the combined entity will remain exposed to competitive pressures. Thus, organic EBITDA growth post, full synergy realisation, will remain a key rating sensitivity factor. Moreover, support provided to the combined entity by its sponsors, Vodafone and ABG, will continue to be critical,” rating agency said on Tuesday, August 6.

Vodafone Idea in FY19 annual report said that the company is making significant investments for expanding coverage and capacity of 4G network with target of reaching 80 per cent 4G population coverage (95 per cent coverage in key profitable districts) and 2.5 times capacity by March 2020, compared to September 2018. The proceeds from the rights issue coupled with various assets monetisation initiatives underway puts your company in a strong position to achieve its strategic intent, it added.

In past one month, shares of Vodafone Idea tanked 57 per cent from level of Rs 12, as compared to a 6 per cent decline in the S&P BSE Sensex.

At 10:41 am, the stock was trading 4 per cent lower at Rs 5.42, against a marginal 0.06 per cent fall in the benchmark index. A combined 80 million shares have changed hands on the counter on the BSE and NSE so far.