Shares of Vodafone Idea Ltd. (VI) jumped 10% in the opening session on April 1 after the company announced that the Central Government will convert its outstanding spectrum dues into equity shares.
VI will issue 3,695 crore equity shares at a price of Rs 10 per share, converting dues worth Rs 36,950 crore into stock. However, the last closing price of Vodafone Idea shares on the stock exchanges was Rs 6.8 per share.
At 9:18 AM, Vodafone Idea shares were trading at Rs 7.48 on the NSE, up 10% from the previous session’s close.
Following this conversion, the Government of India’s shareholding in Vodafone Idea will rise from 22.6% to 48.99%. However, the company stated in its exchange filing that the promoters will continue to have operational control over the telecom operator.
The issue price of Rs 10 per share was determined based on the volume-weighted average price over the last 90 trading days or the preceding 10 days before the relevant date (February 26, 2025), as per the Companies Act, 2013.
Government’s Second Equity Conversion
Vodafone Idea confirmed that the Ministry of Communications had made an order on 29th March 2025 approving the conversion under the September 2021 Telecom Reforms Package. The company received the official order on 30th March 2025.
This is the second instance in which the Indian government has converted Vodafone Idea’s debt to equity. Previously in 2023, Rs 16,133 crore worth of debt was exchanged with equity at Rs 10 per share.
Following the government’s action, Citi Research has reiterated its “buy” rating on Vodafone Idea with a target price per share of Rs 12 and expects a 76% upside from the recent closing levels.
However, Citi Research further noted that while the conversion relieves the financial stress on Vodafone Idea, the telecom operator still finds it tough to mobilize new funds to support its 4G and 5G networks.
Domestic broker Motilal Oswal said that the government equity conversion provides cash flow relief and is a mid-term positive development. It added that stabilizing its subscriber base, raising long-overdues debt funding and relief in AGR dues remain crucial to ensure Vodafone Idea’s survival in the long run.
Motilal Oswal additionally said that government support to maintain the Indian market 3+1 and alleviating financial stress from Vodafone Idea are positive news for Indus Towers, a telecom services provider of telecom infrastructures.
The broker has raised its target price on Vodafone Idea to Rs 6.5 per share from Rs 5 on the back of the government’s premium equity conversion.
Despite the rally during the day, shares in Vodafone Idea have lost over 50% in the past 12 months, reflecting the apprehensions among investors about its financial troubles and growth prospects.
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Source: Moneycontrol.
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