Vodafone Idea Eyes Capital Raise As Shares Jump 9% And Debt Remains High

By Thea Felicity

Feb 23, 2024 01:42 PM EST

(Photo : GERARD JULIEN/AFP via Getty Images))
A picture taken on on July 28, 2015 shows the logo of British telecom giant Vodafone atop the Spanish headquarters in Madrid. British telecom giant Vodafone said today it planned to lay off up to 1,300 workers, about a fifth of the workforce, from its Spanish division which bought cable provider ONO last year.

Vodafone Idea Limited experienced a notable surge in its share value, News18 states that the prices soared by 9% to reach Rs 17.60 ($0.21) during the morning trading session on Feb. 23.

This uptick marked the second consecutive day of gains, following a commendable 6% increase observed in the preceding session.

At the same time, Vodafone Idea Limited has also divulged plans to raise funds, albeit without specifying the exact amount. These fundraising endeavors are expected to occur in one or more tranches through the issuance of equity instruments, which may include rights issues or preferential shares.

Vodafone's Revenue

Vodafone also registered a substantial net loss of Rs 6,985.9 crore ($96 million) in the third quarter of the fiscal year 2023-24. This represents a notable 12.56% decline compared to the corresponding period in the previous year, managing to record a modest revenue uptick.

The revenue for the same quarter amounted to Rs 10,673.1 crore ($142 million), showcasing a slight increase of 0.49% from Rs 10,621 crore ($141 million) reported in the third quarter of the preceding fiscal year.

However, the telecom operator continues to grapple with pressing challenges, most notably its high debt levels and the pressing need for substantial capital investments.

These investments are crucial for network upgrades and the timely rollout of 5G services, which are necessary for Vodafone Idea to effectively compete with industry rivals such as Bharti Airtel and Reliance Jio.

As of December, Vodafone Idea's gross debt stood at a staggering Rs 2.15 lakh crore ($28 billion).

This debt comprises deferred spectrum payment obligations amounting to Rs 1.38 lakh crore ($18 billion), AGR liability of Rs 69,020 crore ($920 million) owed to the government, dues of Rs 6,050 crore ($80 million) towards banks and financial institutions, and optionally convertible debentures totaling Rs 1,660 crore ($23 million).

Vodafone's Debt Warning

Acknowledging the situation's urgency, Aditya Birla Group Chairman Kumar Mangalam Birla reiterated the group's commitment to Vodafone Idea. Birla emphasized ongoing efforts to secure external investors, contributing to a rally in the company's stock following his statements.

Despite the positive sentiments surrounding Vodafone Idea, Nuvama analysts have issued a cautious recommendation, advising investors to reduce their exposure to the stock. This recommendation stems from concerns arising from the company's Q3FY24 earnings performance.

The report underscores the importance of closely monitoring Vodafone Idea's capital-raising efforts and tracking the trajectory of Average Revenue Per User (ARPU).

Additionally, Nuvama emphasizes the need for the company to prevent a significant lag in the rollout of 5G technology compared to its industry peers.