Vodafone Idea rises 6% in weak market; stock surges 12% in 5 days
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Shares of Vodafone Idea, the debt-laden telecom services provider, jumped 6 per cent to Rs 8.43 apiece on the BSE in Friday's intraday trade, in an otherwise weak market.
Including today's gains, the stock has rallied 11.5 per cent so far this week. By comparison, the benchmark S&P BSE Sensex has slipped 0.6 per cent during this period.
At 10:20 AM, the stock the telecom company was up 5.3 per cent as against 0.56 per cent dip in the Sensex index. Shares of Reliance Industries, meanwhile, were up 0.03 per cent, and those of Bharti Airtel were down 0.57 per cent.
According to reports, the debt-ridden telecom operator plans to clear about Rs 2,400 crore of dues to the government by September. The company has also cleared pending dues of licence fees and spectrum usage charges of about Rs 450 crore for the March quarter of 2022-23.
Vodafone Idea (VIL) was required to pay a licence fee of around Rs 770 crore by July and Rs 1,680 crore as the first instalment for the spectrum it purchased in auctions held last year.
"While the company has sought 30 days to clear the spectrum payment, the company is also gearing up to clear the licence fee payment by September. Dues on late payment of spectrum instalment will attract 15 per cent interest rate on annual basis. The company will have to pay around Rs 1,700 crore for spectrum instalment and around Rs 710 crore for licence fees with interest. The total amount pending to be cleared by September is over Rs 2,400 crore," PTI reported.
VIL's total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2023, stood at Rs 2,11,760 crore, comprising deferred spectrum payment obligations of Rs 1,33,740 crore, and AGR liability of Rs 66,860 crore that are due to the government.
Its net loss had widened to Rs 7,840 crore in the April to June quarter as against loss of Rs 7,297 crore in the year-ago period, and Rs 6,419 crore in the preceding March quarter.
Revenue from operations rose by 2 per cent to Rs 10,655 crore in the first quarter, compared with Rs 10,410 crore in the same quarter of last year. Moreover, average revenue per user (ARPU) for the first quarter came in at Rs 139 as against Rs 135 in the previous quarter, showing a sequential growth of 2.9 per cent.
"It continues to lose subscribers (mainly in 2G segment) and that adversely impacts revenue growth. The addition of 4G subscribers remains muted. It needs capital infusion for augmenting the capital expenditure to catch up with peers in terms of 4G coverage/capacity. It has still not announced any timeline with regard to 5G implementation. We expect that 2G to 4G migration would continue to drive ARPU growth. We expect Ebitda margin to improve in near term led by continued focus on operational efficiency," said analysts at YES Securities.
The brokerage estimates revenue CAGR of 10.7 per cent over FY23‐25 with average Ebitda margin of 41.0 per cent. "We maintain our SELL rating on the stock with a target price of Rs 6/share based on EV/EBITDA of 8.5x on FY25. The stock trades at EV/EBITDA of 14.1x/11.7x on FY24E/FY25," it added.
Meanwhile, the company added 1.3 million mobile broadband subscribers in the month of June, after declining in two out of the last 4 months. However, its active subsribers base fell by 2.5 million, and overall subsribers declined by 1.3 million in June, 2023, continuing the decreasing trend over the past many months due to churn in the lower ARPU segments given the sharp hike in entry level prepaid tariffs.
"Notwithstanding the moratoriums, VIL needs to close the fund-raise exercise quickly for a meaningful increase in capex to boost upgrade of customers to MBB," said analysts at JM Financial.
Motilal Oswal Financial Services, meanwhile, has a 'Neutral' rating and a target of Rs 7.5 on the stock as the significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any ARPU increase.
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