Why Vodafone Idea Share climbed 15%? Detailed Analysis

Reason behind Vodafone Idea Share rally today. Detailed Analysis 

The Vodafone Idea Share is on focus today as Vodafone share price rallied over 15% on Tuesday trading day. With this Vi share price hit a high of Rs.7.67. The stock was low to 7% a month ago. 

Story So Far 

As per Nomura India's note on November 15, the major takeaways from the post-results conference call with the management of Vodafone Idea suggested that VIL primarily lost subscribers to BSNL because of tariff hikes announced in July 2024. But the trend has started reversing from August onwards. " 

Vodafone Idea management said that it would take another two quarters for the full impact of these tariff hikes to be reflected. Adding that VIL will commence 5G rollout across key geographies by Q4FY25, the management further suggested that "VIL's targets 4G population coverage to reach 120 crore by September 2025E." 

In Q2FY25, VIL added 42,000 4G sites and closed down 19,700 3G sites. Guidance was Rs 8,000 crore for 2HFY25, Rs 50,000-55,000 crore over the next three years. 

Key Reason for Vodafone Idea Share Rally 

Cabinet Approval has been for the proposal to waive bank guarantees (BGs) that telecommunication companies are required to pay for spectrum available up to the year 2022. Vodafone Idea stands to gain the most from it, as the company is to pay over Rs 24,700 crore owed to the government, which was to be submitted from September 2024 to February 2025. 

Vodafone Idea's Debt  

Vodafone Idea net debt, excluding leases but including non-due accrued interest, increased Rs.9,300 crore sequentially in Q2 to Rs 2.12 lac crore on repayment of dues to vendors/banks. and also spectrum acquisition. VIL owed Rs 2.23 lac crore to the Government for deferred spectrum (Rs.1.52 lac crore) and AGR dues (Rs.70,300 crore).

Vi has written to the DoT to waive off the bank guarantee (BG) requirement worth Rs 24,700 crore (to be submitted from September 2024 to February 2025) to securitize spectrum installments. We believe Vi’s debt raise is also contingent on securing BG waivers," said MOFSL in the previous note.

(Inputs taken from Business Today) 

Conclusion 

Positive developments, including government approval to waive bank guarantees amounting to Rs.24,700 crore, which reduces the financial burden on the company, have led to a recent upturn of 15% in Vodafone Idea's share price. The company's management shared optimistic growth plans such as covering 4G and launching 5G by FY25. 

However, crippling debt still weighs on Vodafone Idea; however, these actions work to its advantage. Investors have high expectations for future expansion and recovery by the company. This would be a tough road to walk as results depend on the successful implementation of the plans and money secured. This spurt is proof of a heightened trust in the business by the market.

Disclaimer: Not a buy or sell recommendation/advice. No investment or trading advice is given. This blog is purely for information and education purposes. Always discuss investment-related decisions with your eligible financial advisor before investing.