Why Vodafone Idea shares fell 14% despite board approval for fundraise

Vodafone Idea shares plummeted 14% despite the company’s board approving a plan to raise funds. The telecom operator’s stock was trading 13.80 per cent lower at Rs 13.68 apiece at around 1 pm.

Investors on Dalal Street remained unimpressed by Vodafone Idea’s decision to raise funds, citing concerns over its massive debt burden of Rs 2.5 lakh crore.

The plan to raise funds to the tune of Rs 45,000 crore was deemed insufficient to address the company’s debt woes, leading to the sharp decline in its share price.

Analysts at Nuvama Institutional Equities view the fund raise as a positive step operationally, but anticipate limited financial impact.

Similarly, Nomura suggests that while repairing operational performance, recovering subscribers, and rolling out 5G may take time to materialise, they maintain a “reduce” rating on the stock.

With an average rating equivalent to “sell” from 15 analysts, and a median price target of Rs 6.50, according to LSEG data, investor sentiment remains bearish on Vodafone Idea.

The company’s shares surged initially after considering the fundraise, but have since retreated amidst lingering concerns over its debt and operational challenges.

On Tuesday, the telecom operator announced in a stock exchange filing that its board approved a fundraising of up to R 20,000 crore via a combination of equity and / or equity-linked instruments.

“The company will call for a meeting of its shareholders on April 2, 2024 and post-shareholder approval it expects to complete the equity fund raise in the coming quarter,” it said.

“In addition, the company remains actively engaged with its lenders for tying-up the debt funding, which will follow the equity fund raise. Through a combination of equity and debt, the company plans to raise around Rs. 45,000 crore,” added the company’s statement. India Today