Shares of Vodafone Idea Ltd jumped 5 percent in early trade on June 14 post a reported infusion plan of Rs 14,000 crore for revival. At 9:50 am the Vodafone Idea Ltd stock was trading 6.50 percent higher at Rs 8.19 on NSE.
Vodafone Idea is planning a significant capital infusion of Rs 14,000 crore, with Aditya Birla Group and UK's Vodafone Group contributing half of the amount, as part of its business revival plan. ABG and Vodafone Group are expected to invest Rs 2,000 crore as fresh equity, on top of the Rs 5000 crore capital already invested in the company after the telecom revival package in September 2021. They will also work to raise another Rs 7,000 crore from external investors.
Vodafone Idea to be worst affected as tariff hikes expected after June 2024: Kotak Equities
The delay in increasing headline tariffs due to upcoming state and general elections next year is expected to negatively impact all three major carriers in India - Airtel, Jio, and Vodafone Idea. Among them, Vodafone Idea is predicted to suffer the most. The significant outstanding debt of Rs 1.96 trillion owed by Vodafone Idea to the government further complicates matters, potentially leading to substantial equity dilution and making it unappealing to potential investors.
“The rising competitive intensity to attract premium subscribers and several key state and general elections over the next 12 months would likely delay tariff hikes to June 2024 (after the general elections). Though a delay in the tariff raise is negative for all three telcos, we believe Vi would be the worst impacted.," analysts at Kotak Institutional Equities Research said in a note.
Analysts estimated that the Aditya Birla Group promoted telecom services provider will face a cash shortfall of Rs 5,400 crore in FY24 and survival would be a challenge without a large and expedited fund raise. In addition to this, Vodafone Idea owes nearly Rs 13,500 crore in vendor payments.
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Stock Performance
Vodafone Idea Ltd stock has lost 78.02 percent of its value over the last five years. Thus, significantly underperforming the benchmark Nifty50 index, which has given a return of 72.99 percent over the same duration.
Whereas, on a six-month basis also the stock has underperformed the benchmark index considerably. As it has lost 5.20 percent of its value in comparison of a 0.75-percent return by the benchmark Nifty50 index.
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