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regular-article-logo Sunday, 26 May 2024

Shares of Vodafone Idea Ltd crashes 14 per cent as fund-raising announcement fails to lift sentiment

On Tuesday, company’s board approved proposal to raise Rs 20,000 crore via equity, in which promoters will also participate

Our Special Correspondent Mumbai Published 29.02.24, 10:27 AM
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The shares of Vodafone Idea Ltd (VIL) crashed 14 per cent on Wednesday as its fund-raising announcement failed to lift sentiment, with brokerages raising questions over its impact on the company’s operations and financials.

On Tuesday, the company’s board approved a proposal to raise Rs 20,000 crore via equity, in which the promoters will also participate.

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It also disclosed its intention to raise another Rs 25,000 crore through debt.

The proposed mobilisation is significant for the company which needs to expand its 4G network and catch up with its two rivals who have already invested in 5G.

VIL’s announcement failed to boost the stock. It plummeted 13.99 per cent to settle at Rs 13.65 on the BSE after plunging 14.93 per cent during intra-day trades to Rs 13.50.

On the NSE, it fell 13.88 per cent to end at Rs 13.65 after falling 14.82 per cent to a day’s low of Rs 13.50. As a result of the fall, its market capitalisation eroded from Rs 10,806.71 crore to Rs 66,447.95 crore.

Brokerage Motilal Oswal said in a report that after the completion of the fundraise, the company will have the capability to invest in the expansion of its 4G network and deployment of 5G technology.

However, it pointed out that the company still holds a debt of Rs 2.1 lakh crore with an annual instalment of Rs 43,000 crore from 2025-26 onwards.

According to the brokerage, this looks challenging against 2023-24 EBITDA (earnings before interest, taxes, depreciation & amortisation) of Rs 8,400 crore.

CLSA has given VIL a sale rating with a target price of Rs 5, while Nuvama retained its reduced rating with a target price of Rs 7.

Analysts at Nuvama said that the fund-raise will have a limited impact on VIL's financials.

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