Shares of Vodafone Idea experienced a notable surge of 10% to Rs 8.48 apiece on the BSE during Wednesday’s intra-day deals, following reports indicating that promoters are considering infusing funds into the heavily indebted telecom company. Find out the latest updates and gain insights into the financial status of Vodafone Idea.
At 9:53 AM, the telecom services provider’s shares were trading 5.6% higher at Rs 8.14 per share, outperforming the benchmark S&P BSE Sensex, which witnessed a marginal dip of 0.18%. Notably, a combined total of 210.73 million shares were exchanged on the NSE and BSE by the time of writing this report.
In comparison, Bharti Airtel’s shares declined by 1%, while Reliance Industries (the parent company of Reliance Jio) observed a 0.3% increase in their share value.
According to a reliable report, the promoters, namely Aditya Birla Group (ABG) and UK’s Vodafone Group Plc, are contemplating an infusion of Rs 14,000 crore into Vodafone Idea. The report suggests that the allocated amount would be evenly distributed between the two entities.
The Economic Times reported, “The plan was submitted to the government earlier this month, and ABG and Vodafone Group will soon invest Rs 2,000 crore as fresh equity in the company.” This report contradicts the previous claims made by the promoters, where they had denied any plans of infusing fresh funds into the company.
In the previous month, Vodafone Plc, the British telecom giant, stated that the carrying value of Vodafone Group’s investment in the debt-ridden Vodafone Idea Ltd (VIL) was zero. However, it emphasized that VIL required additional liquidity support from its lenders and intended to secure additional funding.
Furthermore, in February of this year, the government approved the conversion of over Rs 16,133 crore interest dues of Vodafone Idea into equity as part of the reforms package announced in September 2021.
Financial Status:
During the January to March quarter of FY23, Vodafone Idea (Vi) reported a consolidated net loss of Rs 6,418 crore compared to the previous year. The net loss witnessed a 2.2% decline on a year-on-year basis due to revenue growth and an increase in 4G customers. Sequentially, the net loss reduced by 19.6%.
In the fourth quarter of FY23, gross revenue increased by 2.8% YoY to Rs 10,531 crore, while earnings before interest, tax, depreciation, and amortization (EBITDA) declined by 9.4% to Rs 4,210 crore. Operating expenses rose by 13% to Rs 6,321 crore on a year-on-year basis.
On a sequential basis, the average revenue per user (ARPU) remained flat at Rs 135, witnessing an 8.8% increase on a year-on-year basis.
Analysts at Nuvama Institutional Equities have revised their earnings estimate for Vi in FY24/FY25E, increasing it by 3.9%/3.8% due to lower interest expense. They, however, maintain a “Reduce” rating with a target of Rs 6 as the near-term outlook remains uncertain.
In a recent report, they stated, “The dual impact of continuing subscriber loss and high debt has put VI in a precarious situation. Capex continues to be minimal for maintenance requirements. Inability to expand 4G coverage and incur 5G capex is leading to subscriber share loss. Meanwhile, tariff hike in the near term looks uncertain.” They valued Vodafone Idea at 8x FY25E EV/EBITDA.
On the other hand, analysts at Kotak Institutional Equities have predicted that rising competitive intensity, including RJio’s aggressive family postpaid plans and unlimited 5G data offerings, along with upcoming key state/general elections over the next 12 months, might delay tariff hikes until June 2024 (post general elections).
They added, “Delayed tariff hikes, while negative for the sector, would hurt Vi’s survival hopes the most (faces Rs 5500 crore cash shortfall in FY24) and could lead to accelerated market share gains for Bharti and RJio at Vi’s expense.”
Source of this News: Business Standard
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