The stock of Vodafone Idea witnessed a huge rise on Tuesday and it touched Rs 8.57, climbing 25.8 per cent during the trading session on BSE. The government has decided to convert the dues of this company’s spectrum auction into equity, which made the investors excited.
According to the information given to the exchange, the company has been directed to release 36.95 billion equity shares of face value of Rs 10 in the name of the Government of India at Rs 10. These stock market regulators are to be issued within 30 days of the required order of other competent authority including regulator SEBI.
The government’s stake in the company will be around 48.99 per cent after the Vodafone Idea is converted into equity shares. Currently, the government holds 22.60 percent stake in this telecom company. This change will reduce the joint promoter share of Voda Idea from around 38.7 per cent to 25.5 per cent, while the shareholders’ stake will decrease from 34 per cent to 23.8 per cent.
Voda Idea clarified that the promoters will have control over the company’s operations. Voda Idea’s stock on exchanges gained 18.94 per cent to close at Rs 8.10 while the benchmark BSE Sensex fell by 1,390 points. BSE and NSE traded about 2.65 billion shares on Tuesday.
At the end of the December quarter of FY 2024-25, Vodafone Idea postponed the owner of Rs 1.38 lakh crore to the government under the item of the spectrum and the adjusted gross revenue of Rs 69,020 crore.
According to analysts, the VI will get relief in cash flow from conversion into equity and this is a significant positive progress for the moderate period. For example, the Global Brokerage City has said that Vodafone Idea supports the government’s support and timely decision that will give a big relief to the telecom company on cash flows in the next three years and will help in raising a long -standing bank loan.
City said, Voda Idea’s net debt is likely to decrease by about 18 per cent when the spectrum dues are converted into equity. We estimate that spectrum outstanding on the company (for earlier spectrums of 2021), which is to be paid in the financial year 26/27/28, can be reduced from Rs 11,000 crore/25,000 crore/25,000 crore to about Rs 500 crore/5,000 crore/15,000 crore respectively. This will give him relief from cash flow of about Rs 40,000 crore in the next three years. City has given a target of Rs 12, giving a rating to buy it.
However, analysts believe that the company will need more assistance from the government. Analysts of Motilal Oswal said that VI has to pay Rs 16,500 crore annually for the AGR dues starting from March 2026 and this amount does not include changes in the proposed equity.
Analysts of Motilal Oswal Financial Services have given it a neutral rating in their report and have increased the target from Rs 5 to Rs 6.5 per share. He said that the cash flow of the company is insufficient to pay the AGR dues as well as to give money to its current capital expenditure schemes. However, given the Indian government’s commitment to maintaining a 3+1 market structure, we believe that it can get further relief from the Government of India on the AGR dues.
Analysts of global brokerage McCery have also given a target price of Rs 7, keeping a neutral rating on this stock as it does not see the company’s growth. Despite government assistance, analysts believe that the most important for the existence of Voda Idea in the long term is stable and getting help again from the government.
Despite the possible rapid rise in capital expenditure in the medium period, they believe that the customer base will be a major challenge for VIs to re -achieve as its competitors have better free cash flow and strong funds. He said that VI is still a high risk-high profit company.
Motilal Oswal Financial has warned, saying, with the latest equity change, the Indian government’s stake in this company will increase to 49 per cent. The government’s share will cross 50 per cent due to the change in equity of the arrears and arrears, which can transform Voda Idea into PSU.
First Published – April 1, 2025 | 10:28 PM IST
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