Vodafone Idea shares edge higher ahead of board meeting to consider fundraise

Shares of cash strapped-Vodafone Idea (Vi) remained in focus on Monday ahead of its board meeting today to consider a fundraising proposal. In an exchange filing last week, Vi, a joint venture between Vodafone and the Aditya Birla Group, had said that its board will meet on December 9 to consider the issue of equity shares or convertible securities up to ₹2,000 crore to promoter entities.

“A meeting of the board of directors of the company is scheduled to be held on Monday, 9 December 2024, inter-alia, to consider proposal for raising of funds not exceeding ₹2,000 crore,” Vi had said in a regulatory filing on December 4.

As per the release, the capital will be raised by way of issuance of equity shares or convertible securities on a preferential basis to one or more entities belonging to Vodafone Group (one of the promoters of the company).

Last week, Vodafone Plc, a promoter entity of Vi, had sold its remaining 3% stake in mobile tower installation company Indus Towers for ₹2,802 crore. The seller intended to use part of the proceeds to repay its own existing debts.

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Ahead of board meeting, shares of Vodafone Idea opened marginally higher at ₹8.15 against the previous closing price of ₹8.12 on the BSE. In the first two hours of trade so far, the telecom stock gained as much as 2% to ₹8.28 apiece.

At the time of reporting, Vi shares were trading 0.25% higher at ₹8.14, paring most of early gains, with a market capitalisation of ₹20,992 crore. At the current level, the telecom heavyweight trades 57% lower than its 52-week high of ₹19.15 on June 28, 2024. The stock, however, has risen 23% from its 52-week low of ₹6.60 touched on November 22, 2024.

In the past six months, the stock has seen sharp correction of nearly 50% after foreign brokerage firm Goldman Sachs retained ‘Sell’ call on the telecom stock, cutting target price to ₹2.5 apiece amid concerns that recent capital raise by the company is unlikely to be sufficient enough to stop its market share erosion.

Vi recently raised ₹20,100 crore ($2.4 bn) in equity (through a combination of a follow-on public offer and capital infusion from promoters; excluding vendors). In addition, the company says it intends to raise another ₹25,000 crore in debt ($3 bn), though it didn’t specify a timeline.

Vodafone Idea has gross debt of ₹2.1 lakh crore ($26 billion), of which only about $600 mn is owed to banks and financial institutions, with the remainder payable to the government of India towards spectrum ($17.2 bn) and AGR (adjusted gross revenue) dues ($8.5 bn). These government dues are currently under moratorium until October ‘25, after which the telecom operator will have substantial payment obligations. The company’s recent filings show that its repayment obligation would be $3.3 bn in FY26, rising to $5 bn in FY27 (excluding dues not under moratorium).

Taking into account repayments such as interest expense on new debt, minimum spectrum dues, and other payables, Goldman Sachs estimates Vodafone Idea to have a maximum capex potential of ₹62,600 crore ($7.5 bn) by Mar ’25.

The telco is in discussion with the government, requesting its support by providing a waiver for bank guarantees. It is also seeking government intervention in AGR matter where the Supreme Court has rejected to admit curative petition on technical grounds. VIL, along with promoters, is in discussion with banks for debt funding which may help the company in rolling out 4G and 5G networks in next three years.

For the second quarter ended September 30, 2024, Vi’s consolidated net loss widened to ₹7,176 crore, up from ₹6,432 crore in the previous quarter. However, on the year-on-year basis, the loss narrowed from ₹8,737 crore in Q2 FY24 amid rise in revenue following recent tariff hikes. The revenue from operations increased 2% year-on-year (YoY) and 4% quarter-over-quarter (QoQ) to ₹10,932 crore in Q2 FY25. The revenue benefited from average revenue per user (ARPU) growth of 6.8% QoQ and 9.9% YoY to ₹156. At the same time tariff hikes lead to elevated subscriber loss, with 4G subscriber base falling by 0.8 million QoQ to 125.9 million due to dual SIM consolidation and loss of market share to BSNL.