Vodafone Idea soars 9% on fund raising plan; Indus Towers up 5%

The company's board is scheduled to meet on February 27 to consider fundraising via equity or debt instruments.

Shares of Vodafone Idea (VI) soared 9 per cent to Rs 17.74 on the BSE in Friday’s intra-day after the telecom services provider said its board will meet on February 27 to consider fundraising proposals. The fundraising could be through equity or debt instruments.

With today's gain, the stock price of VI has surged 30 per cent in the past three weeks. It has more-than-doubled or zoomed 212 per cent from its 52-week low of Rs 5.70 touched on March 31, 2023. The counter has seen huge trading volumes with a combined 677 million equity shares changing hands on the NSE and BSE till 10:12 AM.

Meanwhile, shares of Indus Towers rallied 5 per cent to Rs 237.20, as compared to 0.18 per cent rise in the S&P BSE Sensex, on hopes of revenue visibility.

In an exchange filing, VI said the board of directors will consider and evaluate all proposals for "raising of funds in one or more tranches by way of a rights issue, further public offer, private placement including preferential allotment, qualified institutions placement or through any other permissible mode and/or combination".

VI saw its net loss narrow to Rs 6,986 crore for the December 2023 quarter (Q3FY24), helped by Rs 755.5 crore one-time exceptional gain, while the average revenue per subscriber improved for the ailing telecom company (telco). VIL's net loss stood at Rs 7,990 crore in the year-ago period.

VI's bank debt at the end of Q3FY24 stands at Rs 6,050 crore (excluding Rs 1,600 crore of optionally convertible debentures (OCD) to American Tower Corp (ATC)). Company has to pay around Rs 3,200 crore in bank debt in the next one year. An amount of Rs 2,000 crore as financial support (when received) from the promoters will reduce cash constraint for VI till H1FY26, as bank debt obligation has reduced, analysts at Emkay Global Financial Services said.

VI will need to make a payment of around Rs 30,000 crore in H2FY26 and around Rs 45,000 crore from FY27, for spectrum/AGR dues and capex. This may require tariff hike as well as further equity conversion of Rs 17,400 crore by the Government of India each year, from FY27.

VI may require average revenue per user (ARPU) to increase from Rs 145 to around Rs 230 by FY27-end, which looks achievable, given another round of tariff hike looking imminent post elections; VI likely converting its around 9.5 crore 2G users to 4G; and reduced validity on the Rs 99 minimum recharge pack (from 28 days to 15) in 16 circles, the brokerage firm said, adding clarity on the fundraise and tariff hike is the key positive trigger.

Meanwhile, according to analysts at a brokerage firm, Indus is witnessing demand for rural expansion and densification in urban areas, particularly from Bharti Airtel. Management expects the order book to remain strong for the coming quarters. They believe the Rs 2,000 crore financial support by VI’s promoter, when received, will reduce cash constraint for VI till H1FY26E, as VI’s bank debt obligation reduces post-Q4FY24. This can provide revenue visibility for Indus.