Why Vodafone Idea stock is falling, Indus Towers climbing today? Details

The UK's Vodafone Group Plc is selling its remaining 3% stake in Indus Towers in block deal and fully exiting the company

Shares of Vodafone Idea (Vi) fell 3 per cent to Rs 8.15 on the BSE in Thursday’s intra-day trade after the company said its board will consider fundraising of up to Rs 2,000 crore in a meeting on December 9. The stock has fallen 7 per cent from its opening price level of Rs 8.79 on the BSE. In comparison, the BSE Sensex was up 0.01 per cent at 80,966 at 09:47 AM.

 

The company is set to consider a proposal for raising of funds by way of issuance of equity shares and / or convertible securities on a preferential basis to one or more entities belonging to Vodafone Group (one of the promoters of the company). Vodafone Plc. is likely to infuse funds in the telecom company. 

 

Meanwhile, shares of Indus Towers were trading nearly 2 per cent higher at Rs 364.40. The stock has rallied 5 per cent to Rs 376 on the BSE in intra-day trade after Vodafone Group Plc (Vodafone) announced that it has launched a placing of its remaining 79.2 million shares in Indus Towers, representing 3.0 per cent of Indus' outstanding share capital, through an accelerated bookbuild offering.

 

The proceeds from the share sale will be used firstly to repay Vodafone's outstanding borrowings of $101 million to Vodafone's existing lenders, secured against Vodafone's Indian assets, the company said.

 

“As per the terms of the security package provided by Vodafone Promoters to secure the payment obligation of Vodafone Idea under the Master Services Agreements (MSA), the Company released the pledge on 3.003 per cent shares held by Vodafone Promoters in the Company, on December 04, 2024 for the relevant Vodafone Promoters to execute the sale of such shares and utilise the proceeds as per the terms of the security package provided by Vodafone Promoters,” Indus Towers said in an exchange filing.

 

As permitted under the Security Arrangements, Vodafone intends to contribute the residual proceeds from the placement (after repayment of Vodafone's outstanding borrowings) towards an issue of new equity shares by Vi once the terms of such a capital raise have been evaluated and decided on by the board of directors of Vi. The proceeds from the capital raise would be used by Vi to pay outstanding MSA dues to Indus, Vodafone said.

 

Following the repayment of Vodafone's outstanding borrowings, if any Indus shares remain, such Indus shares and any proceeds which are not used by Vodafone to subscribe to new shares in Vi would be available to Indus to guarantee Vi's obligations under the MSAs, Vodafone added.

 

“We highlight that remaining proceeds (around $200 million) will be infused as fresh equity into Vi to help the latter clear a portion of its old dues to Indus Towers. Also, Vi’s total dues to Indus are still sizeable, Rs 7,000+ crore, and this will lower it by one-fourth,” ICICI Securities said in a research note.

 

Meanwhile, Vi expects another tariff hike of 15–20 per cent in 15 months, which will help the company grow revenue, earnings before interest, tax, depreciation and amortisation (Ebitda) and free-cash flow (FCF). The company also has strong gross subscriber addition, while net additions have been negative due to elevated churn, the brokerage firm noted.  It believes 4G rollout should help the company improve customer retention, resulting in growing subscribers' base.