Vi stock falls to 52-week low amid uncertainty over funding

Shares of Vodafone Idea Ltd plunged to their 15-month low today after reports that the cash-strapped telecom service provider failed to secure much-needed funding from banks as well as the government. The Vi stock opened a gap-down at ₹7.78 today and soon saw heavy selling, falling 6% to its 52-week low of ₹7.35.

The stock has fallen 7.36% in the past week; 6.78% in the past month; 14.79% in the past six months; 7.25% in the year-to-date period; and 49.97% in the one-year period. The stock's previous low was recorded on December 23, 2022, at ₹7.61.

At the time of filing the report (1.45 pm), the total trading quantity of the stock on the counter was 18 crore as compared to the two-week average quantity of 10.2 crore. With the fall in the stock value, the market cap of Vi has also dipped to ₹23,832.19 crore.

The telecom operator is severely in shortage of capital to make vendor payments and the 5G rollout. It is in talks with the banks, for raising ₹20,000 crore as loan and equity, in addition to the equity capital of ₹5,000 crore from the promoters Aditya Birla Group and Vodafone Plc. To give confidence to the lenders, the promoters had infused around ₹5,000 crore in May. The company even made a prepayment of ₹2,700 crore short-term loan to SBI.

Last week, a media report suggested that the telco had sought ₹7,000 crore in "emergency funds" from several banks, including State Bank of India, Punjab National Bank, HDFC Bank and IDFC First Bank, even though banks have shown reluctance so far.

However, it's possible that lenders are awaiting either the government's final decision on debt-equity conversion or are looking at a capital increase by Vi promoters Vodafone Plc, UK, and Aditya Birla group. It has now become a deadlock as the public sector banks, especially SBI, have backed out from talks due to no clarity on the government’s plan.

It’s also reported that the fund infusion worth ₹10,000 by the Vi promoters could come either by this month or next.

Notably, the government recently said that Vi needs funds from different sources and that only debt-equity conversion will not solve its problems. In January 2022, the board of VIL opted to convert the interest on its dues into equity as part of the Telecom Relief Package, but the government is yet to take a call. Reports say the Centre wants the capital from investors and banks to flow in first.

Amid a strong push led by Reliance Jio and Bharti Airtel, including their speedy launch of 5G services in multiple cities, Vodafone Idea has proved to be a laggard, primarily due to a debt burn of ₹2 lakh crore, which includes the highest regulatory payout in the AGR case, mounting losses and continuously sliding market share.

The company is, meanwhile, trying hard to improve its financials amid stiff competition in the market. Its average revenue per user (ARPU) improved by 2% to ₹131 in the second quarter, compared to ₹128 in the first quarter. The subscriber base, however, declined to 234.4 million vis-à-vis 240.4 million in the first quarter. The 4G subscriber base continued to grow, and the telco added 1.5 million 4G customers in Q2.