Vodafone Idea Hits 25% Upper Circuit: What’s Spurring the Rally?
By Malvika Gurung
Investing.com -- Shares of the beleaguered telecom company Vodafone Idea (NS: VODA ) rallied a whopping 23.36% to Rs 8.45 apiece while writing, after soaring 25% in the session and hitting an upper circuit of Rs 8.55 apiece on Monday.
The stock skyrocketed in response to the Government order passed on Friday, Feb 3 of converting Vodafone (LON: VOD ) Idea’s total accrued interest related to the deferment of spectrum auction instalments and adjusted gross revenue (AGR) dues into equity shares.
The total amount that will be converted into equity shares is Rs 16,133.18 crore. With this, the Government of India will hold a 33% stake in the loss-making telecom company.
This is likely to make the Centre the largest shareholder in the joint venture telco.
Further, the Government has made it clear earlier too that it has no interest in playing a managing role in Vi’s operations, given its shareholding in the telco nor does it plan to convert Vi into a state-owned telco post the conversion.
Read Also: Govt Portrays No Interest in Vodafone Idea’s Operations; Stock Zooms Over 6%
While the Indian government’s move of opting for equity conversion rather than interest payments due from Vodafone Idea removes an overhang, large fund infusion from promoters/investors will be crucial for the company to repay near-term dues and sustain investments, stated a BS report.
"This was long-awaited decision. Key will be how quickly company raises fund as it has failed to pay its vendors, while lagging in network spends. We do not expect any major relief till a big fundraise or strategic investment is seen," stated ICICI Securities (NS: ICCI ).
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