Vodafone Idea Ltd. (VI) shares rose 10% during the opening session on April 1 after the company stated that the Central government will convert its outstanding spectrum dues into equity shares.
VI would issue 3,695 crore equity shares at a price of Rs 10 each, converting dues into stock worth Rs 36,950 crore. However, the last closing price for Vodafone Idea shares on the bourses was Rs 6.8 each.
At 9.18 a.m., shares of VI were trading at Rs 7.48 on the NSE, up 10% from the previous session’s closing.
Vodafone Idea share Price jump 10% as government converts Rs 36,950 crore dues into equity
Following the conversion of equity shares, the Government of India’s stake in Vodafone Idea will grow from 22.6% to 48.99%. “The promoters will continue to have operational control of the company,” the corporation stated in a statement with the stock exchanges.
According to the telecom operator, the issue price was calculated using the volume-weighted average price for the previous 90 trading days or the 10 days preceding the relevant date (February 26, 2025), in accordance with the Companies Act, 2013.
In a press statement, Vodafone Idea stated that the Ministry of Communications issued an order on March 29, 2025, allowing the conversion in accordance with the September 2021 Telecom Reform Package. The business got the order on March 30.
This is the second time the government has converted Vodafone Idea’s debt to equity. In 2023, Rs 16,133 crore of debt was converted to equity at Rs 10 per share.
Citi Research, an international brokerage, has confirmed its buy recommendation on Vodafone Idea in response to the government’s action. The firm maintained its target price of Rs 12 per share, indicating a 76 percent increase over the previous session’s closing price.
Citi Research did, however, say that, while Vodafone Idea’s immediate financial burden has been alleviated, the telecom operator would continue to encounter challenges in raising new money to extend its 4G and 5G network.
Motilal Oswal, a local brokerage, commented, “GoI equity conversion provides cash flow relief for Vi and is a key medium-term positive development, but stabilization of its subscriber base, long-pending debt raise, and further relief on AGR dues remain vital for Vi’s long-term survival.”
The brokerage said that the government’s sustained commitment to retaining a 3+1 market structure in the Indian telecom industry, as well as the relaxation of Vi’s cashflow limitation, are both good for Indus Towers.
“Vi remains a high-risk, high-reward gamble. Motilal Oswal raised its target price from Rs 5 to Rs 6.5 per share, citing the Government of India’s equity conversion at a premium.
Vodafone Idea shares have lost more than 50% of their value in the last year, highlighting investor concerns about the company’s continued financial issues and future development prospects.
Disclaimer: The opinions and financial advice offered by Businessconnectindia.in investment experts are solely their own and do not represent the website or its administration. businessconnectindia.in recommends customers to consult qualified specialists before making any financial decisions.
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