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Vodafone Idea fundraise: Rs 2,075 cr to be raised via share allotment to ABG

Vodafone Idea (Vi) has announced that its board has approved raising up to Rs 2,075 crore from Oriana Investments, an entity of promoter Aditya Birla Group, through a preferential share issue. This move aims to bolster the debt-laden telecom operator’s capital reserves amidst ongoing financial turbulence.

In a recent regulatory filing, Vodafone Idea informed the stock exchanges about the board’s decision to allot 139.54 crore equity shares to Oriana Investments Pte Limited. These shares are being issued at a face value of Rs 10, with an issue price of Rs 14.87 per equity share, which includes a premium of Rs 4.87 per equity share. This preferential allotment aggregates to a substantial Rs 2,075 crore.

Following this share issuance, Vodafone Idea’s paid-up equity share capital will increase from Rs 66,483.45 crore to Rs 67,878.88 crore. This infusion of funds from Oriana Investments represents a critical step in the telecom operator’s broader strategy to stabilize its finances and enhance its market position.

The company recently reported a net loss of Rs 7,674 crore for Q4FY24, compared to a loss of Rs 6,418.9 crore in the same quarter the previous year. Despite this, revenue from operations saw a slight increase to Rs 10,606 crore, up from Rs 10,531 crore in the same period last fiscal year. The average revenue per user (ARPU) also saw a marginal rise to Rs 146 from Rs 145.

The recent preferential share issue to Oriana Investments is part of a larger plan to raise Rs 45,000 crore through a combination of debt and equity. This follows the company’s successful raising of around ₹18,000 crore through a follow-on public offer (FPO) that closed on April 22.

The infusion of funds and the company’s broader financial strategy have not gone unnoticed. Brokerage firm Nomura recently upgraded Vodafone Idea Ltd to “neutral” from “reduce” and raised the target price to Rs 15 per share. This reflects a 13.2% increase from the previous close, indicating a more optimistic outlook following the successful fund raise and the company’s efforts to improve its financial health.

On the trading floor, Vodafone Idea’s shares were observed with gains of over 1%, trading at Rs 13.70 per share as of 10:35 am on the National Stock Exchange (NSE). Remarkably, the stock has appreciated nearly 95% over the past year.

The capital infusion from Oriana Investments is more than just a financial boost; it signals the promoter’s confidence in the company’s long-term viability. This preferential allotment is expected to provide Vodafone Idea with the necessary liquidity to manage its operations and invest in network improvements, thereby enhancing its competitive edge in the telecom sector.

Furthermore, the improved ARPU and the modest increase in revenue from operations suggest that the company is making incremental progress in enhancing its operational efficiency. However, the significant net loss highlights that there is still a long road to recovery.

Vodafone Idea’s move to secure Rs 2,075 crore from Aditya Birla Group’s Oriana Investments marks a critical step in its ongoing efforts to stabilize financially. While the company continues to face substantial challenges, this capital infusion, along with the broader fundraising initiatives, offers hope. Goodreturns

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