Vodafone Idea gains 14% on fund raising plans

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MUMBAI :
Shares of Vodafone Idea gained as much as 13.61% on Wednesday after the telecom operator said its board of directors will meet Friday to consider proposals to raise funds.

At 02:44 pm, Vodafone Idea was trading at 9.75 up 9.67% from its previous close, while the benchmark Sensex advanced 0.38% to 39,048.17.

The announcement was made after market hours yesterday.

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Vodafone Idea in a regulatory filing said that it will “consider and evaluate any and all proposals for raising of funds in one or more tranches by way of a public issue, preferential allotment, private placement, including a qualified institutions placement or through any other permissible mode and/or combination thereof, including foreign currency convertible bonds, convertible debentures, warrants, and/or non-convertible debentures including non-convertible debentures along with warrants, which may or may not be listed.”

Yesterday, Supreme Court gave telecom operators 10 years to clear adjusted gross revenue (AGR) dues. Vodafone Idea, along with other telecom companies will now have to make an upfront payment of 10% of the total dues by 31 March as per the SC order. Thereafter, they will have to pay the balance amount in equal annual instalments over 10 years at an interest rate of 8%, as directed by the apex court.

Analysts at Motilal Oswal in a note said “Vodafone should be able to manage the cash flow requirement in FY21 without a price hike, considering that it has a total 14100 crore cash requirement in 9MFY21, including capex of 6400 crore and an upfront amount of 5800 crore for AGR, along with cash interest cost of 1900 crore,against 5100 crore of operating cash flow(OCF), 7100 crore from Vodafone PLC, and 4000 from the Bharti Infratel stake sale. Hence, to offset the cash requirement, it would have to take of 22% price hike to manage the funding requirement. The company may require a huge round of price hike, along with a capital raise, to offset the gap”.

Vodafone Idea reported a net loss of 25,460 crore for the quarter ended 30 June against a loss of 4,874 crore in the same period last year. Net sales fell 5.4% to 10,659 crore during Q1 FY21 compared with 11,270 crore a year earlier.

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