When VI’s (Vodafone Idea) board announced the preferential shares allotment to its promoters for additional funds of Rs 4,500 crores, analysts thought the news was a positive for the sinking company. The share opened well at Rs 11.30 but quickly fell 6.76% as the share saw a low of Rs 10.20.
These additional funds were set to be used for paying the outstanding debts to Indus Towers and balance of which would be invested into the network. Edelweiss said that this fundraising was long awaited and necessary, but a small part of the nearly Rs 15,000 crore capital raise.
Vodafone group entities will infuse Rs 3,375 crores from the proceeds of the sale of its stake in Indus Towers. The balance Rs 1,125 crores will be infused by the Aditya Birla group. This allotment is said to dilute 12% on the current equity base.
“The announced fund-raise still remains miniscule in comparison to Vodafone Idea’s debt. It still needs to continue to raise significant capital to repay existing dues as its total net debt as of nine months of FY22 stood at Rs 1.97 lakh crore. It is yet to be seen if any external strategic investors decide to participate in Vodafone Idea’s upcoming Rs 10,000-crore capital raise given the underlying challenges that the company faces,” Kotak Institutional Equities wrote in its report.
Highlight by Aman Agarwal.