Strong rally of 25% in Voda Idea, the debt-ridden company got the government’s support, what do experts say
The Government of India has approved the conversion of over Rs 16,133 crore interest dues of debt-ridden Voda Idea into equity. After this conversion, the government will hold 1613 crore shares in the firm, which is roughly equal to a 33 percent stake.
Voda Idea Share Price: Today, a strong rally of about 25 percent is being seen in the shares of Vodafone Idea, a telecom sector company. At present, the stock is trading at Rs 8.55 per share with a gain of 24.82 percent. In fact, the Government of India has approved the conversion of interest dues of more than Rs 16,133 crore of this debt-ridden company into equity. After this conversion, the government will hold 1613 crore shares in the firm, which is roughly equivalent to a 33 percent stake.
What Indian government statement
DIPAM Secretary Tuhin Kanta Pandey has said, “We will not have any board seats. Our holding will be classified as public shareholding.” Asked why the conversion was done at Rs 10 when the market price is Rs 7, he said, “The price should be as per the law. The conversion should be at par. The government cannot violate the law.”
After waiting for almost a year, the government has taken this step, due to which it will now become the largest shareholder in the company. This also instills confidence in the stability of the company. There are also reports that the promoters may now infuse more money into the company. However, many experts are not positive about this as the company is struggling to raise funds.
What do experts say
CLSA has maintained its sell rating on the stock with a target price of Rs 6. CLSA said that on converting the interest into equity, the government would hold a 33 percent stake in the company. British Vodafone Group will hold 31.7 percent and Aditya Birla Group will hold 18.2 percent. The brokerage house believes that Vodafone Idea will remain in trouble until its Average Revenue Per User (ARPU) reaches Rs 300. Its ARPU for the September 2022 quarter stood at Rs 131, the lowest among its peers.
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