Vodafone idea
The shares of debt -ridden telecom company Vodafone Idea (VIL) may gain tremendous boom. This estimate has been made by Citi Research. According to the city report, Voda Idea’s stock may rise 76% from the current price. The reason for this is the relief from the government. City has described the government’s move to increase its stake in the company to 48.99% as a balance sheet. Along with this, City Research has raised the target price to Rs 12 per share, repeating the high risk rating on Vodafone Idea. The current price of Idea shares is Rs 6.80.
The company will get great relief on the cash front
City has said in its report that the government’s approval to convert a spectrum of Rs 36,950 crore of Vodafone Idea (VIL) into a stake is a ‘big’ and ‘time’ step taken by the company’s support. City said in a report that this stake acquisition will provide great relief to the telecom company on the cash flow in the next three years. This will also help the company to raise a long pending bank loan. According to the report, this move of the government has also removed the concerns of tower companies like Indus Towers. Vodafone Idea Limited said in a regulatory notice on Sunday that the government has agreed to increase the stake in the company to 48.99 percent with the acquisition of new shares worth Rs 36,950 crore in exchange for the outstanding amount of spectrum auction.
Government of India is the largest shareholder
The government is currently its largest shareholder with a 22.6 percent stake. Vodafone Idea said that it has been directed to issue 3,695 crore equity shares with an inscribed price of Rs 10 at a issue price of Rs 10 within 30 days after the issuance of necessary orders from the Securities and Exchange Board of India (SEBI) and other authorities. Along with this, Vodafone Idea said that its promoters will have the operation control of the company.
Loan will decrease by 18 percent
The total loan of Vodafone Idea will be reduced by about 18 percent by converting spectrum arrears into equity. We estimate that the company’s spectrum dues in the next three financial years can decrease from Rs 11,000/ 25,000/ 25,000 crore to about 500/ 5,000/ 15,000 crore rupees. In this way, cash flow of more than Rs 40,000 crore will get relief in the next three years. However, City said that the annual spectrum payment of about Rs 2,200 crore and an annual adjusted gross revenue (AGR) payment of Rs 16,500 crore will be payable for the spectrum received after the year 2021. Apart from this, offering 5G services in select cities should also help in improving the perception of the company.
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