Vodafone Idea shares surge 24% on approval to convert interest dues into equity

Shares of Vodafone Idea rose sharply in Monday's trade after the government agreed to convert the telecom operator's interest dues into equity. Vodafone Idea, in an exchange filing, said that the Centre directed it to issue shares worth Rs 16,133.10 crore at an issue price of Rs 10 per share.

The stock surged 24.38 per cent to hit a day high of Rs 8.57 over a previous close of Rs 6.89. Around 7.70 crore shares changed hands today on BSE, which was more than double compared to Voda Idea's two-week average volume of 3.32 crore shares. Turnover on the counter stood at Rs 57.29, commanding a market capitalisation (m-cap) of Rs 26,530.17 crore. There were 2,24,53,128 buy orders today against nil sell orders.

The stock was last seen higher than 5-day, 20- and 50-day moving averages but lower than 100-day and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 63.90. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a negative price-to-equity (P/E) ratio of 0.78.

Voda Idea has an average target price of Rs 7.60, Trendlyne data showed, suggesting a potential downside of 7.32 per cent. The scrip has a one-year beta of 1.25, indicating high volatility.

In 2022, the telecom department computed the net present value (NPV) on the interest on spectrum and adjusted gross revenue (AGR) on deferred statutory dues at Rs 16,133.1 crore. The dues owed by the telco to the government for use of airwaves including the interest related to payments for spectrum.

In October last year, market regulator SEBI approved the conversion of Voda Idea dues into equity. The relief for the company comes as part of the reforms package announced by the Centre in September 2021.

In 2021, the government approved a rescue package for debt-strapped telecom companies, allowing them to convert interest on deferred adjusted gross revenue owed to the government into equity. In 2020, Supreme Court gave telecom firms 10 years until 2031 to clear the dues.

The telecom sector was disrupted by the entry of Mukesh Ambani's Reliance Jio and the sector's troubles had also been compounded by large dues owed to the government.

As of September last year, the company's total gross debt, excluding lease liabilities and including interest accrued but not due, stood at Rs 2,20,320 crore.

Voda Idea had earlier said that with the conversion of dues into equity, the Centre would get around a 33 per cent stake in the company. The telco has 24.3 crore mobile subscribers accounting for 21.33 per cent market share, as per the latest data published by telecom regulator TRAI.

Meanwhile, Indian equity benchmarks slipped in early trade, dragged by automobile, metals and technology stocks.

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