Shares of Vodafone Idea, a telecom company that has been struggling for a long time, took a big leap today. The government has increased its stake in it to 48.99 percent. Due to this, the company's stock got stuck in an upper circuit of 10 percent as soon as the market opened today. Know how far the price can go...
The stock of the country's third largest telecom company Vodafone Idea went into upper circuit as soon as the market opened today. It rose 10% in the morning to reach Rs 7.49 on BSE. The government has converted the company's outstanding spectrum payment of Rs 36,950 crore into equity. This will reduce the debt burden on the company and improve its financial condition. With this step, the government's stake in Vodafone Idea will increase from 22.6% to 48.99%. At the same time, the stake of private promoters Vodafone PLC and Aditya Birla Group (ABG) will decrease. Vodafone PLC's stake will be 16.1% and Aditya Birla Group's stake will be 9.4%. However, the functioning of the company will remain in the hands of the promoters.
Debt of company reduced
This move of the government will give a lifeline to Vodafone. This is the second time after 2023 that the government has converted its liabilities into equity in Vodafone. This will help Vodafone Idea in cash flow. After the moratorium on payment was lifted in September, the company will have to pay more money but now it will get relief. Experts say that Vodafone Idea has to pay spectrum and AGR dues of Rs 29,000 crore in the second half of FY26. Now this debt will be reduced to Rs 11,000 crore. From FY27, the company will have to pay Rs 17,000 crore instead of Rs 43,000 crore every year.
What brokerages are saying
Vodafone Idea had Rs 12,090 crore in the quarter ended December. The company has said in a filing that the Ministry of Communications has decided to convert the outstanding spectrum auction amount into equity as part of the reforms announced for the telecom sector in September 2021. This equity will be issued to the government. This means that the government will now become a shareholder in the company.
After this news, global brokerage firm Citi Research has maintained a 'buy/high risk' rating on Vodafone Idea. They say that the government taking a 48.99% stake in the company will strengthen the company's balance sheet. They have set the target price of the share at Rs 12. This means that the stock can rise by up to 76%. The brokerage firm says that increasing the government's stake will provide financial help to the company for the time being. But the company will still face difficulties in raising new money and expanding 4G and 5G networks.
How far will the price go
According to Trendline data, the average target price of Vodafone Idea shares is Rs 8. This means that the stock can rise up to 18%. 22 analysts have advised to 'sell' this stock. Technically, the Relative Strength Index (RSI) of the stock is 35.7. This is showing neutral condition. MACD is -0.3, which is below the center line. This is a negative signal.
The stock is trading below its 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day and 200-day simple moving averages (SMA). SMA is a type of average that tracks the price of a stock. The stock has declined 15% so far this year. It has fallen 48% in the last 12 months. The market capitalization of the company is Rs 48,618 crore.