Vodafone Idea zooms 10% amid heavy volumes on ratings upgrade by CARE

Improvement in the industry dynamics post telecom reforms announced by the government, which addressed the liquidity woes of the sector, led to the upgrade said Care Ratings.

Shares of Vodafone Idea (VIL) soared 10 per cent to Rs 11.75 on the BSE in Wednesday’s intra-day trade on the back of heavy volumes after Care Ratings (CARE) upgraded its rating on the company’s long term bank facilities and non-convertible debentures (NCD). The rating agency also assigned a 'stable' outlook.

At 09:51 am; the stock traded 7 per cent higher at Rs 11.48, as compared to 0.92 per cent rise in the S&P BSE Sensex. A combined 198 million equity shares changed hands at the counter on the NSE and BSE in first 35 minutes of trade.

The revision in the ratings assigned to the bank facilities and instruments of Vodafone Idea Limited (VIL) follows improvement in the industry dynamics post telecom reforms announced by the Government of India (GoI), which addressed the liquidity woes of the sector to a large extent, including that of VIL, Care Ratings said in rating rationale.

Followed by tariff hikes across telecommunications service providers (TSPs), raising average revenue per user (ARPU) for the industry at large, VIL’s on-time repayment of large NCD obligations in H2FY22 are the credit positives. Subsequent to the telecom reforms, CARE Ratings expects the fund-raising activities to pick up pace at VIL’s level, based on articulation by the management, including partial funding support from the existing promoters in the near future, the rating agency said.

Going forward, the ability of the company to raise funds to support its operations, undertake capex and refinance the short-term debt remains a key rating monitorable. Prevalent intense competition in Indian Telecom industry impacting VIL’s operational performance as reflected in its declining subscriber base are other credit weaknesses, Care Ratings said. CLICK HERE FOR FULL DETAILS

Meanwhile, the stock had corrected 36 per cent from its 52-week high level of Rs 16.79 on December 10, 2021 till Tuesday. The company’s board on January 10, 2022 had approved the conversion of the full amount of interest related to spectrum auction installments and AGR dues into equity. The Net Present Value (NPV) of this interest is expected to be about Rs 16,000 crore as per the company’s best estimates, subject to confirmation by the Department of Telecommunications (DoT).

Since the average price of the company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs 10 per share, subject to final confirmation by the DoT, the company had said.