Vodafone Idea up 12%, hits 21-month high on hopes of equity infusion by Dec

A combined 774 million equity shares, representing 1.6 per cent of total equity of Vi, changed hands on the NSE and BSE till 12:57 PM

Shares of Vodafone Idea (Vi) rallied 12 per cent to hit a fresh 21-month high of Rs 13.36 on the BSE in Wednesday’s intra-day trade amid heavy volumes.

The stock of the telecom services provider was quoting at its highest level since January 2022. In the past two trading days, it has surged 15 per cent. The stock surpassed its previous high of Rs 12.45 touched on September 27, 2023.

At 12:57 PM; shares of Vi was quoting 11.8 per cent higher at Rs 13.29 as compared to a 0.2 per cent decline in the S&P BSE Sensex. The average trading volumes on the counter jumped over three-fold today.

A combined 774 million equity shares, representing 1.6 per cent of total equity of Vi, changed hands on the NSE and BSE.

The sharp up move in the stock comes on expectations of fund infusion of its promoters. According to media reports, the management in its quarterly earnings call said that the promised promoter funding commitment of Rs 2,000 crore should close in the current December quarter.

Vi chief executive Akshaya Moondra said the company will close its equity funding talks in the ongoing quarter, which will be followed by banks lending more. Talks with equity investors have progressed from the last quarter, the management said.

Vi promoters plan to offer Rs 2,000 crore financial support, while discussions on external funding have moved to due diligence stage.

Analysts at Emkay Global Financial Services believe Rs 2,000 crore support from the promoters will reduce cash constraint for Vi till H1-FY26, as bank debt obligation reduces post Q2FY24.

"If Vi manages to raise additional funding of Rs 20,000 crore, a part of it can be used for 5G rollout and aid in arresting subscriber exits. Vi needs to make yearly payment of Rs 43,100 crore for spectrum and AGR when the moratorium ends in FY27. With further equity conversion of Rs 17,400 crore by govt, Vi needs ARPU improvement at 14 per cent CAGR over Q1FY24-FY27 (Rs 231 by FY27), which looks achievable, though it would lead to equity dilution", the brokerage said in a report in August.

Meanwhile, in the July-September quarter (Q2FY24), Vi recorded 0.6 per cent sequential improvement in gross revenue at Rs 10,716 crore aided by better subscriber mix and 4G subscriber additions.

On a reported basis, earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter grew by 3 per cent from Rs 4,157 crore in Q1FY24 to Rs 4,283 crore and EBITDA margins were at 40 per cent from 39.0 per cent in previous quarter.