Vodafone Idea stock prices jumped 24% to reach a high of Rs 8.57 on the Bombay Stock Exchange after the Indian government converted the company’s accumulated interest of Rs 16,133 crore, related to the deferred payment of AGR and spectrum fees, into equity shares.
Vodafone Idea shares are traded in the futures and options market segment, which does not have any restrictions on price movements. The stock hit its all-time low of Rs 6.33 on January 27, 2023.
As of 10:51 AM, approximately 500 million shares have been traded on the Bombay Stock Exchange and National Stock Exchange. The stock has experienced a 23% increase and is currently priced at Rs 8.35. Meanwhile, the S&P BSE Sensex has declined by 0.7% and is at 60,432. With this transaction, the government will own a 33% stake, becoming the largest shareholder in the telecom joint venture between Vodafone of the UK and Aditya Birla Group, owned by Kumar Mangalam Birla, which is facing financial challenges
This recent development took place approximately 13 months after the approval of the interest conversion by the Vi board. Despite the Union Cabinet’s approval of a telecom package, including the conversion of debts into equity, in October 2021, the government recently imposed a condition requiring the promoters of Vi to invest funds into the company before any equity conversion could occur.
The government’s choice to switch to equity conversion instead of interest payments owed by Vi eliminates a problem, however, a substantial investment from the company’s owners and investors will be essential for Vi to meet its near-term obligations and maintain future investments.
The decision made by the government to switch to equity conversion instead of interest payments owed by Vi has been a long-awaited event. However, ICICI Securities states that the key factor will be how quickly the company raises funds. The company has been struggling to pay its vendors and has lagged in network spending, so a significant investment or strategic investment will be necessary to bring relief.
Shares of Indus Towers saw a surge of 15% to Rs 164.80, as investors hope to receive their dues from Vi. The stock hit a two-year low of Rs 135.20 on January 27, 2023. In the October-December quarter of the fiscal year 2023 (Q3FY23), the company reported a net loss of Rs 708 crore, primarily due to provisions for the doubtful debt of Rs 2,201 crore and exceptional charges of Rs 493 crore.
The company’s revenue was down 12.7% quarter-over-quarter and 5% year-over-year, reaching Rs 6,765 crore in Q3FY23. The earnings before interest, taxes, depreciation and amortization (EBITDA) saw a decline of 68.6% year-over-year, reaching Rs 1,163 crore, with EBITDA margins down 36 percentage points year-over-year at 17.2%. The company provided against doubtful debts of Rs 2,270 crore against dues from Vi.
Indus Towers is India’s leading provider of passive telecom infrastructure and provides telecom tower and communication structure management services to various mobile operators.
