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Vodafone Idea fell 10% as the market didn’t seem satisfied with Rs. 45k fund-raising plan

Vodafone Idea fell 10% as the market didn’t seem satisfied with Rs. 45k fund-raising plan

For the last many months, Vodafone Idea has been on a losing streak month over month, losing a minimum of a million subscribers each quarter and some time close to over 2 million subscribers or above. A cash-strapped telecom operator, Vodafone Idea, which has a big bloat of debt on its books, numbering more than Rs 2 lakh crore, is set to raise funds of Rs 45,000 crore through a combination of equity or equity-linked instruments and debt. The company's board has approved an equity fundraiser of up to Rs 20,000 crore, and the promoters will also participate in the proposed equity raise. The company will call for a shareholder meeting on April 2, 2024, and expects to complete the equity fund raise in the coming quarter.

Watching the rate at which the stock price is falling intraday shows that the market is not satisfied with the quoted numbers that the board has come up with. The stock has fallen without making gaps on the daily chart, with heavy volumes. The plan might surely be positive for the company in the short term, comforting the telecom with its upcoming debt obligations, clearing up bank dues, and putting itself on the map by rolling out the 5G network. But to stay afloat on the map, you might need another board meeting.

As per the circular, the fund-raising program will enable the company to make investments towards significant expansion of 4G coverage, 5G network rollout, capacity expansion, and improvement in operating metrics. These investments will enable the company to improve its competitive positioning and offer an even better customer experience. With limited investments, the company has consistently shown improvement in performance and managed to grow its 4G subscriber base and ARPUs consecutively for the last 10 quarters. So the company hopes that with the proposed fund-raising plan and the positive operational developments, they can effectively compete in the market.

VIL CEO Akshay Moondra highlighted that the telco could roll out its 5G services within six to seven months after raising funds. VIL's bank debt currently stands at below Rs 4,500 crore, and the company has been in talks with lenders and investors to raise funds.

In the third quarter of the fiscal year 2023–24, the telecom operator recorded a net loss of Rs 6,985.9 crore, a decrease of 12.56 percent compared to Rs 7,990 crore in the corresponding period of the previous year. However, its revenue came in at Rs 10,673.1 crore, an increase of 0.49 percent from the year-ago period.

Vodafone Idea is a partnership between Aditya Birla Group and Vodafone Group, providing pan-India voice and data services across 2G, 3G, and 4G platforms.

Even though Vodafone India shares have fallen by more than 10% intraday, there is a company whose stock opened higher after the fund-raising announcement.

Indus Towers, a company that installs, owns, and manages communications structures and telecom towers for wireless operators, opened negative, but rose by 56% in the first half. As of October 2023, Vi owes Indus Towers approximately Rs 5,600 crore. Many brokerage firms have highlighted the positive fund-raising program for the Indus Tower.

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