Vodafone Idea shares surged 25% in trade on Monday as the government permitted converting the telecom operator’s interest dues into equity. Vodafone Idea scrip touched an intraday high of Rs 8.55, up 24.8% from Friday’s close of Rs 6.85. The net present value of the interest dues regarding the AGR dues and deferment of spectrum auction installments amounts to Rs 16,133.10 crore which will be converted into a 33% stake in the loss-making operator.
The market capitalization of the company rose to Rs 26,819 crore on the back of this news. As a result of the government’s reform package, VI will issue 16 billion fresh shares, adding to its existing base of 32 billion fully-paid up equity shares. The issue price of Rs 10 came at a premium of 45.9% to Friday’s closing price. The latest TRAI data suggested that Vodafone Idea held a 21.32% market share, with 249.82 million subscribers.
The government has already clarified in a media interaction that it has no desire to run the company after the conversion, and nor do they want a duopoly in the telecom market in India. The government would act as a sleeping partner to support the company running the business, which will help the firm improve in the tight competition against Airtel and Jio, said Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities.
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Vodafone Idea company outlook: Challenging times ahead
Tapse added that raising funds for daily expenditure is the biggest challenge VI faces, stating, “I believe the challenge is going to increase more and more going forward with weaker than expected subscriber data. Time being the news is positive but poor business outlook and balance sheet would still be a concern for long term investors.”
Vodafone Idea share price outlook: Here’s what technical charts say
Rameshver Dongre, Research Analyst – Equity Research, CapitalVia added that the impact of the refinancing package is overall positive. VI underperformed on the daily chart over the last one year, but is up nearly 40% from its 52-week low on Monday. “On the higher side the range of Rs 8.65 to 9.00 will be crucial; if any closing is completed above this range, then only fresh buying is suggested. Until that point, it is in the negative region and may go even lower, down to the 6.30 level. Investors reduce their weight from this share when it comes higher around the 8.65-9.00 range,” he stated.
Offering a contrary opinion, A R Ramachandran, Co-owner, Tips2trades, said, “Vodafone Idea looks bullish on the daily charts. A close above 7.85 could lead to higher targets of 10.10-11.5 in the near term. Support will be at 6.85.”