The famous proverb – “Try Try till you succeed” – seems to be the motto of Vodafone Idea Ltd, as the cash strapped telecom operator makes yet another attempt to raise fresh equity capital.

On Thursday, the company said that its board will meet on February 27 to consider and evaluate fundraising in one or more tranches through equity instruments, including rights issue, preferential issue of shares, qualified institutional placement of shares, or a combination thereof.

For Vodafone Idea, fundraising is vitally important if it has to survive as India’s third player in the telecom industry.

The company has been losing subscribers month after month as financial constraints have held back expansion plans and network upgradation.

“We remain engaged with various parties for fundraising to make required investments for network expansion, including 5G rollout,” Akshaya Moondra, CEO of Vodafone Idea had said.

Aditya Birla Group Chairman Kumar Mangalam Birla reiterated the group’s firm commitment to the telecom operator and asserted that efforts are on to rope in external investors.”We are making good progress but can’t put in a timeline…We remain very committed to Vodafone Idea and like we have said in public domain, efforts are on to get outside investors,” Birla said.

Murmurs on Street

Last month, media reports had said that billionaire Elon Musk was considering picking up a stake in the telecom operator, which would help his satellite internet firm Starlink get an entry pass to India.

The news saw the bulls partying on Dalal Street as shares of Vodafone Idea rallied. However, the euphoria fizzled out when the company issued a clarification saying that it was in no tie-up talks with Musk.

If not Musk, then it remains to be seen who is ready to bet their bucks on the debt-laden telecom operator.

Mounting Debt

Capital investment is essential for Vodafone Idea to take on the rivals – Reliance Jio and Bharti Airtel – who are closer to completing 5G services rollout pan India.

However, it first needs to address the elephant in the room – the debt on the balance sheet.

Vodafone Idea’s gross debt as of December end, stood at Rs 2.15 lakh crore, comprising deferred spectrum payment obligations of Rs 1.38 lakh crore, AGR liability of Rs 69,020 crore due to the government, dues of Rs 6,050 crore towards banks and financial institutions, and optionally convertible debentures amounting to Rs 1,660 crore.

The operator has managed to reduce the debt from banks and financial institutions by a little over Rs 7,000 crore in the last one year, but it has a long way to go.

Stock Story

Mounting debt, subscriber losses aside, Vodafone Idea shares have had a dream run in the current financial year.

Infact, it has been the best for the telecom operator in three years as the stock’s value has gone up by nearly three times on the back of gains in each of the months of FY24, barring January.

The nine-month winning streak for the stock was the longest-ever since it got listed in 2007.

What’s also interesting to note is that in the last 10 months, both foreign institutional investors and mutual funds have steadily increased their holding in the company.

But analysts on the sell side are in no rush to hit the “buy” button on the stock.

This is because they continue to believe that the company is in a precarious situation given the high debt, persistent subscriber losses, and the inability to do 5G capex and upgrade the network – all of which is possible only if the fundraising attempt tastes success.

“Needless to say, fund-raising remains the most crucial requirement for the company as it remains saddled with high debt and repayment obligations. Even so, the top two operators have already rolled out 5G in 5,000-plus cities and towns, and VIL needs to urgently incur

capex for 5G rollout and to upgrade the 4G network,” says Vibhor Singhal of Nuvama Institutional Equities.

While there could be some fireworks on Dalal Street in the backdrop of the fundraising news, the real dhamaka in the stock will be only after the entry of the new investor.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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