Shares of Vodafone Idea Ltd (VIL) are in focus on Monday morning after the telecom operator received a letter from the Department of Telecommunications (DoT), regarding the waiver of bank guarantees . In another development, the promoter entity Vodafone Group settled Rs 11,650 crore as part of its outstanding dues secured against its shares in the domestic telecom operator.
Vodafone Idea shares fell 0.93 per cent to close at Rs 7.49 on Friday. The VIL stock is down 56 per cent in 2024 so far.
“We wish to inform you that DoT vide its communication dated 27 December 2024, has dispensed with the requirement of submission of Financial Bank Guarantees for the Spectrum acquired in Spectrum Auction held in 2012, 2014, 2015, 2016 and 2021, subject to certain terms and conditions,” Vodafone Idea said in a BSE filing.
Prior to the recent reform, bank guarantees aggregating to Rs 24,800 Crore were required to be provided by VIL against each spectrum instalment, 13 months prior to the installment falling due for the auctions. Vodafone Idea said, as per its understanding of the terms and conditions, out of all the 5 auctions, no BGs will be required to be provided by VIL for the 2012, 2014, 2016 and 2021 auctions.
However, VIL said there would be a one-time partial shortfall for the 2015 auction, where the NPV of all payments made would be less than the pro-rated value of spectrum used. The telecom operator is in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction.
In the case of Vodafone Group pledge, the group had raised the debt on almost the entire stake in VIL. The pledge was created in favour of HSBC Corporate Trustee Company (UK) and the debt was raised by Mauritius and India-based entities of Vodafone Group.
“On 27 December 2024, HSBC Corporate Trustee Company (UK) Limited acting as the security trustee for the lenders has released the pledges pursuant to repayment of the outstanding dues owed to the lenders by the Vodafone Promoter Shareholders,” as per the filing.
“Consequently, the indirect encumbrance on 15,720,826,860 equity shares of the target company held by the Vodafone Promoter Shareholders representing 22.56 per cent of the equity share capital of the target company on a fully diluted basis has been released,” the filing said.
Tariff hike
While the recent hike in tariffs increased Vodafone Idea’s average revenue per user (ARPUs), revenue rose only marginally. Vodafone Idea expects the impact of the tariff increase to continue to be seen in ARPU and revenue for the next two quarters, Geojit Financial Services said in a recent note.
“However, it expects the subscriber base to grow with the expansion of its 4G coverage and roll-out of 5G in key geographies Q4FY25 onwards. Further, its fund-raising proposal through the issuance of equity share or convertible securities are expected to support its expansion plan as well as pay down debt,” Geojit Financial said.
The domestic brokerage has maintained its ‘Hold’ rating on the stock, with a revised target price of Rs 8.60, based on 11.9 times FY26E EV/Ebitda.
