Vodafone Idea Shares Up 10% As Government Hikes Stakes; Citi Issues Upgrade

Vodafone Idea: Shares of Vodafone Idea hit upper circuit on Tuesday after the telecommunications firm announced that the government will hike stakes in the company to approximately 48.99%. The development has come after Vodafone Idea converted its dues into shares worth Rs 36,950 crore as per the telecom sector relief package announced in September 2021.

"Ministry of Communications, Government of India has, in line with the September 2021 Reforms and Support Package for Telecom Sector has decided to convert the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, into equity shares," the company said in its stock exchange filing on Sunday.

Vodafone Idea share price hit upper circuit

Vodafone Idea's share price hit an upper circuit during the pre-market session on Monday, 1 April. The company scrip was up 10% to Rs 7.49 per equity share. On Monday, its market capitalisation stood at Rs 53,473.38 crore. The stock hit its 52-week high of Rs 19.15 per share on 28 June 2024.

Government to increase stakes in Vodafone Idea

After the completion of stake issuance, the Indian government's shareholding in Vodafone Idea will increase from 22.6% to approximately 48.99%. Additionally, the promoters will continue to have operational control of the company even after stake issuance. As per the BSE filing, Vodafone Idea will issue 3,695 crore equity shares with a face value of Rs 10 each. The company shares will be issued at a price of Rs 10 each within a month

The share pricing has been fixed based on the higher of the volume weighted price of equity shares during 90 trading days preceding the Relevant Date or 10 days preceding the Relevante Date, ie 26 February 2025.

"The company will take all necessary steps to execute the share issuance upon receipt of requisite approvals," Vodafone Idea added in its stock exchange filing.

Citi Research Update on Vodafone Idea

City Research, in its report, highlighted that the hike in government stakes on Vodafone Idea will boost its balance sheet, hence reiterated its buy/high risk rating in the stock, reported Economic Times. The equity research has set a 72% upside target from the stock's last close but mentioned that Vodafone Idea may still feel financial pressure and difficulty in raising funds for its 4F and 5G expansion plans. The development is also likely to benefit other telecom firms and operators including Indus Towers, Citi Group added.