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Investors show interest in Vodafone Idea, but hesitate due to stock volatility

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In Short:

Vodafone Idea’s spike in stock price has delayed their equity fundraising, with potential investors waiting for stabilization. Government, as the largest shareholder, fully supports Vi in fundraising. Investors have expressed interest once stock stabilizes. Vi plans to raise funds for 4G and 5G services to compete with rivals. Government may participate in rights issue. Company shareholders to meet on April 2 to approve fundraising.

Vodafone Idea Equity Fundraising Delays Due to Stock Spike

A recent surge in Vodafone Idea’s stock price has resulted in a delay in the telco’s much-needed equity fundraising. Potential investors have indicated that they will consider investing in the company once the stock stabilizes around Rs 12-13 per share, according to sources familiar with the matter.

Government Support and Investor Interest

The government, as the largest shareholder in Vodafone Idea with over 33% ownership, has expressed full support for the telco in its equity fundraising efforts. Some investors, including a notable entity from Singapore, have shown interest in investing in the company once the stock price stabilizes.

Despite ongoing due diligence, no final decision has been made on investing in Vodafone Idea, as per sources. The company’s shares touched a high of Rs 17.55 on February 23 but have since traded in the Rs 13-14 range.

Plans for Fundraising and Market Scenario

Vodafone Idea aims to raise Rs 45,000 crore by the June quarter, with Rs 20,000 crore to be raised through equity or equity-linked instruments and an additional Rs 25,000 crore through loans. The funds will be utilized for expanding 4G coverage, rolling out 5G services, and meeting vendor payments.

Experts attribute Vi’s loss of market share to Jio and Airtel to the coverage gap with its competitors. The company has not confirmed plans for a rights issue, but government participation in such an issue remains a possibility.

Future Prospects and Shareholder Meeting

Vi plans to launch 5G services within 6-7 months of securing funding, which it believes will help mitigate subscriber losses. The company’s shareholders are set to meet on April 2 to approve the equity fundraising.

Goldman Sachs estimates that Vi would require significant capital infusion to compete effectively with Airtel and Jio in the absence of rate increases.

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