Stock Tips: After a fall of more than 20 percent in the shares of Vodafone Idea a trading day earlier on Tuesday, it is seeing a rise of about 10 percent today.
Stock Tips: Vodafone Idea shares are seeing a rise of more than 10 percent today (January 12) after a fall of more than 20 percent on Tuesday a trading day ago. It reached a price of Rs 13.20 on NSE in intra-day, while on Tuesday it closed at Rs 11.75.
Shares fell a day earlier after Voda-Idea’s board decided to convert the entire interest on AGR (Adjusted Gross Revenue) and spectrum auction installations into government equity. After this decision, the government’s stake in the company can be 36 percent. While talking about investments, market experts are still not positive about this stock and have retained the rating of Reduce.
Target price remains intact at Rs.7
Domestic brokerage firm Edelweiss believes that the current decision of the company may provide some relief but there may be other problems in future. According to Edelweiss, the sentiment of the shareholders could be negative in view of government intervention. Analysts say that if the government gets majority stake in Voda-Idea, then its board representation will be monitored. Apart from this, for this deal to prove profitable for the government, it is necessary that there should be strong growth in ARPU (average revenue per user). According to Edelweiss, the telecom package has given temporary relief to the company but concerns remain about ARPU growth. In such a situation, Edelweiss has given it a rating of reduce and has retained the target price at Rs 7.
Fund raising will be a problem
According to Kotak Securities, Vodafone’s recent decision has strengthened the prospects of the dominance of two companies Bharti Airtel and Jio in the Indian telecom sector. According to analysts at Kotak Securities, it may be difficult for Voda-Idea to raise more capital and generate enough cash flow to invest in the network. Apart from this, maintaining the subscribers for the next few years is also a challenge.
Government will get shares at the rate of ten rupees
On Tuesday, Voda-Idea had said in a regulatory filing that on August 14, 2021, if the company’s shares were below par value, they would be issued to the government at Rs 10 per share. However, it is yet to get the approval of the Department of Telecommunications. After the completion of this conversion, the shareholding of the existing shareholders of the company, including the promoters, will be reduced. The government’s stake in telecom company Vodafone Idea will be 35.28 percent, Vodafone Group’s 28.5 percent and Aditya Birla Group’s 17.8 percent.