NewDelhi: Vodafone Idea, once the largest telecom company in India following its merger, is now facing a severe financial crisis. The company’s stock has seen a steep decline of over 20 percent in the last two trading sessions, with its share price currently hovering around ₹10. The latest blow comes after a Supreme Court decision that rejected Vodafone Idea’s curative petition in the Adjusted Gross Revenue (AGR) case, forcing the company to pay a massive ₹70,300 crore in government dues.
Court Ruling Adds to Woes
The recent downfall of Vodafone Idea’s shares is primarily attributed to the Supreme Court’s refusal to reconsider the company’s plea regarding AGR dues. Vodafone Idea had contested that its dues should be closer to ₹35,400 crore, a figure significantly lower than the government’s demand. However, the court’s ruling has left the telecom giant facing an overwhelming financial burden, worsening an already precarious situation.
Debt and Dilution: A Financial Strain
Vodafone Idea’s financial struggles are not new, as the company has been grappling with a heavy debt load for years. In a bid to improve its liquidity, Vodafone Idea recently launched a follow-on public offer (FPO) to raise funds, leading to the issuance of over 6,305 crore shares in the market. This move, however, has further diluted the company’s stock, making it more vulnerable to market fluctuations. The company’s market capitalisation now stands at ₹71,304.75 crore, just marginally above its owed government dues, reflecting the grim state of its finances.
Expert Opinions Divided
Market experts have mixed views on the future of Vodafone Idea’s stock. According to Nomura India, the company is navigating through its worst phase yet, and recovery seems distant. Nomura has given Vodafone Idea a ‘buy’ rating, suggesting some optimism about its potential turnaround. However, other firms hold differing opinions. Nuvama Institutional Equities has assigned a ‘hold’ rating, JM Financials categorises it as ‘SAIL’, and Goldman Sachs rates it ‘underperform’, highlighting the ongoing challenges.
Promoters Step In, But Market Remains Unmoved
In a recent move to demonstrate confidence, Vodafone Idea promoter Kumar Mangalam Birla purchased 1.86 crore shares of the company. Additionally, Pilani Investment acquired 30 lakh shares. Despite these acquisitions, Goldman Sachs has not altered its rating, citing the excessive availability of shares in the market as a major concern. With a staggering 6,305 crore shares available, the impact of promoters buying a relatively small quantity of shares appears negligible, failing to significantly affect market dynamics.
What Lies Ahead for Vodafone Idea?
The path forward for Vodafone Idea is fraught with uncertainty. The company’s ability to manage its debt and navigate regulatory challenges will be crucial in determining its future. For now, the stock remains in a tough spot, weighed down by legal setbacks, mounting dues, and market scepticism. As Vodafone Idea continues to grapple with its financial crisis, investors and stakeholders will be closely watching for any signs of stability or further decline.