Vodafone Idea shares surge 7% on BG waiver, cut gains; key details
Vodafone Idea shares surge 7% on BG waiver, cut gains; key details
Vodafone Idea rose 7.09 per cent to hit a high of Rs 8 on BSE. That said, it soon cut gains and was trading 2.81 per cent higher at Rs 7.68, as investors have already baked in the news in the price.
Vodafone Idea (VIL) was required to provide bank guarantees totaling Rs 24,800 Crore for each spectrum installment, 13 months before the installment due date for the auctions.
Shares of Vodafone Idea Ltd (VIL) surged 7 per cent in Monday's trade as the telecom giant received a letter from the Department of Telecommunications (DoT) regarding the waiver of bank guarantees. The stock also gained as promoter entity Vodafone Group settled Rs 11,650 crore as part of its outstanding dues secured against its stake in the domestic telecom operator.
The Vodafone Idea stock rose 7.09 per cent to hit a high of Rs 8 on BSE. That said, it soon cut gains and was later trading 2.81 per cent higher at Rs 7.68 apiece. Investors may have already baked in the news in the price.
"We wish to inform you that DoT vide its communication dated 27 December 2024, has dispensed with the requirement of submission of Financial Bank Guarantees for the Spectrum acquired in Spectrum Auction held in 2012, 2014, 2015, 2016 and 2021, subject to certain terms and conditions," Vodafone Idea said in a BSE filing.
Before the recent reform, Vodafone Idea (VIL) was required to provide bank guarantees totaling Rs 24,800 Crore for each spectrum installment, 13 months before the installment due date for the auctions. According to Vodafone Idea, based on its understanding of the terms and conditions, no bank guarantees will be required for the 2012, 2014, 2016, and 2021 auctions out of the five auctions.
However, VIL stated that there would be a one-time partial shortfall for the 2015 auction, where the Net Present Value (NPV) of all payments made would be lower than the pro-rated value of the spectrum used. The telecom operator is currently in discussions with the Department of Telecommunications (DoT) to finalize the amount of this partial shortfall for the 2015 auction.
Regarding the Vodafone Group pledge, the group had secured debt against almost its entire stake in VIL. The pledge was made in favor of HSBC Corporate Trustee Company (UK), and the debt was raised by Vodafone Group's entities based in Mauritius and India.
According to a filing, on 27 December 2024, HSBC Corporate Trustee Company (UK) Limited, acting as the security trustee for the lenders, released the pledges following the repayment of the outstanding dues owed by the Vodafone promoter shareholders.
Geojit Financial Services recently revised its target price for Vodafone Idea Ltd to Rs 8.60, down from the previous target of Rs 17 set in August this year. Despite the reduction, the new target price still indicates a 10 percent potential upside from Tuesday's closing price of Rs 7.80 per share.
Although the recent tariff hike led to an increase in Vodafone Idea's average revenue per user (ARPU), the company's revenue showed only a marginal rise. Geojit noted that Vodafone Idea expects the effects of the tariff increase to continue impacting ARPU and revenue over the next two quarters.
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