Abstract Factors:
- Vodafone Thought’s large debt, as soon as Rs 2.12 lakh crore, will get a trim as the federal government converts Rs 36,950 crore of spectrum dues into fairness, taking a 49% stake.
- Complete liabilities drop by 17.5% to Rs 1.75 lakh crore, however AGR dues and competitors from Jio and Airtel nonetheless loom giant.
- The federal government’s transfer goals to forestall a telecom duopoly, although its monitor document with struggling BSNL raises doubts.
- Administration buys time by shedding debt, but share dilution worries traders because the inventory lingers at Rs 7-8.
- I stay skeptical, development, not simply survival, is essential earlier than this inventory’s price a wager.
Introduction
I’ve been keeping track of Vodafone Thought. Solely lately I wrote about this firm (you’ll be able to test it out right here), I used to be fairly clear: this inventory felt like a sinking ship. Debt as much as the roof, prospects working away, and a inventory worth that crashed from Rs 100 in 2015 to Rs 7-something by early 2025.
I advised you all then that placing your hard-earned cash right here was like taking part in playing at On line casino. However these days, there’s been some buzz, excellent news, they are saying. The federal government’s stepping in, shopping for extra stakes, and giving Vodafone Thought a lifeline. So, has something modified? Ought to we rethink this inventory? Let’s focus on this Vodafone Ida episode as soon as mroe.
The Huge Information: Authorities to the Rescue (Once more)
The newest headlines are screaming that the Indian authorities has bumped up its stake in Vodafone Thought to nearly 49%. How? By changing Rs 36,950 crore of spectrum dues into fairness. You may learn these stories just like the one from NDTV Revenue.
This isn’t the primary time both. Again in 2022, they did one thing related with Rs 16,000 crore of dues. Mainly, as an alternative of asking Vodafone Thought to pay money they don’t have, the federal government’s saying, “Take this debt off your books, and provides us shares as an alternative.”
Appears like a candy deal for a corporation drowning in Rs 2.16 trillion of debt, doesn’t it?
Much less debt means much less curiosity to pay, which was consuming up no matter little money Vodafone Thought may scrape collectively. They’ve been dropping cash left, proper, and centre, Rs 7,297 crore loss in only one quarter final 12 months (CNBC TV18).
With this transfer, they could lastly get some room to repair their community, possibly even roll out 5G to meet up with Jio and Airtel. Plus, the federal government proudly owning almost half the corporate? That’s a giant sign. Appears like they don’t need this telecom participant to break down and depart us with simply two large canine available in the market.
However right here’s the place I’ll pause and suppose.
Haven’t we heard this “lifeline” story earlier than? Each few years, there’s some bailout or promise, promoters pitching in, banks restructuring loans, or now the federal government taking part in shareholder. But, the inventory’s nonetheless hovering round Rs 7-8, and my inbox is stuffed with messages from readers asking, what’s my view.
So, I believed, let’s weblog about Vodafone once more, in a couple of week’s distinction (my earlier publish).
The Debt Drama
Let’s speak about some knowledge, as a result of that’s the place the actual story hides.
Vodafone Thought’s debt (complete legal responsibility) was at a large Rs 2.12 lakh crore after I final wrote about it. Now, after these conversions, it has come down a bit. some say Rs 2.1 lakh crore, others peg it nearer to Rs 2.16 trillion after curiosity piles up. Both approach, it’s nonetheless a mountain.
This newest Rs 36,950 crore off the books is a piece, little question, however there’s nonetheless AGR dues (these pesky Supreme Courtroom-mandated funds) and different spectrum dues staring them down. LiveMint says extra conversions is likely to be coming, however will it ever be sufficient?
Take into account this instance. Your good friend borrows Rs 10 lakh from you, pays again Rs 2 lakh, and says, “Don’t fear, I’ll handle the remainder later.” Would you’re feeling assured lending him extra? That’s how I see Vodafone Thought proper now.
Sure, the debt’s decrease, and that’s a plus. However they’re nonetheless bleeding, dropping subscribers (down from 408 million in 2018 to below 200 million now). And, they’re additionally burning money quicker (legal responsibility is consuming most of it).
Decrease debt would possibly cease the bleeding for a bit, however can they really develop? That’s the principle query.
What’s the Authorities Up To?
Let’s speak in regards to the authorities’s function.
Proudly owning 49% of Vodafone Thought makes them the boss, roughly.
The promoters, Vodafone Plc and Aditya Birla Group, are right down to smaller stakes (28.5% and 17.8% after the 2022 conversion, most likely even much less now).
This isn’t nearly cash; it’s technique. The federal government doesn’t need Jio and Airtel to show our telecom market right into a two-player sport. Truthful competitors, higher costs for us shoppers, that’s the concept, as India TV Information factors out.
However let me level a reality, the federal government already has BSNL.
How’s that doing? Not nice, truthfully. BSNL’s been a multitude for years. It’s market share is beneath 10%, no 4G price speaking about, and nonetheless no 5G when Jio and Airtel is already racing forward. They acquired a Rs 69,000 crore revival bundle in 2019 (learn right here), nevertheless it’s nonetheless a loss-making machine with liabilities over Rs 80,000 crore.
If the federal government can’t repair BSNL, why ought to we imagine they’ll flip Vodafone Thought right into a star? It’s like having two leaky boats and hoping one magically floats higher.
Vodafone’s Recreation Plan: Survival or Give up?
So, what’s Vodafone Thought’s administration making an attempt to tug off right here?
Easy, I feel, they’re shopping for time. Vodafone Plc stopped placing contemporary cash in years in the past. Aditya Birla Group isn’t precisely opening its pockets huge both. By handing over stakes to the federal government, they’re shedding debt with out coughing up money.
It’s a wise transfer for survival, much less curiosity to pay, fewer indignant bankers knocking on the door. They’re hoping this provides them a shot at fixing their community, successful again prospects, and possibly, simply possibly, making a revenue sometime.
However there’s the catch for these inventory traders who’re nonetheless hopeful than Vodafone Thought will revive. Each time they do that, our shares get diluted. Extra shares available in the market imply the worth of every one shrinks. The federal government’s shopping for at Rs 10 per share, however the inventory’s buying and selling beneath that.
It’s like promoting your outdated bike to a good friend to repay a mortgage. Certain, you’re much less in debt, however now you’ve acquired no bike and nonetheless want to determine learn how to get round.
Will I make investments
Alright, let’s get to the massive query: is Vodafone Thought price your cash now? After I wrote my final publish, I mentioned no—it’s a raffle not price taking. Right this moment, I’ll soften that a little bit, however not by a lot. Why? Examine the beneath desk for the up to date legal responsibility checklist of Vodafone.
After the present Rs.36,950 crore spectrum dues conversion into fairness, the corporate nonetheless has Rs.1,75,000 crore price of liabilities (dues + debt). This conversion has lowered the Vodafone Thought’s legal responsibility mortgage by solely 17.5%. It the proceed promoting extra stakes, they won’t longer be Vodafone Thought. It’s heading in the right direction of changing into BSNL #2. I’m not going to purchase shares of BNSL. Why? As a result of there are higher options out there available in the market.
| Legal responsibility Sort | Earlier than Deal (Rs Crore) | Change in Deal (Rs Crore) | After Deal (Rs Crore) |
|---|---|---|---|
| AGR Dues | 70,000 | 0 | 70,000 |
| Spectrum Dues | 1,40,000 | -36,950 | 1,03,050 |
| Financial institution Loans | 2,300 | 0 | 2,300 |
| Complete | 2,12,300 | -36,950 | 1,75,350 |
| NOTE: | – | – | Complete legal responsibility column of Vodafone has come down by 17.5%. |
The federal government’s backing and decrease liabilities are steps ahead, little question. In the event that they use this opportunity to roll out 5G, hike tariffs (like Jio and Airtel would possibly), and cease dropping prospects, there’s a flicker of hope.
The inventory would possibly even soar short-term, good for merchants who love a fast buck.
However me? I’m nonetheless cautious. This firm’s been a price destroyer for years, Rs 100 to Rs 7 is a horror story I can’t unsee. They’re surviving, not thriving.
For each rupee of debt they shed, they’re diluting us shareholders extra. Except I see actual development, extra income, extra customers, precise income, I’m not leaping in.
It’s like betting on a crew that’s been dropping each match however guarantees a comeback subsequent season. Doable?
What do you concentrate on this new Vodafone Thought’s breaking information? Is it a optimistic step too small or its a step that’s going to revive the corporate as soon as and for all. Inform me your views within the remark part beneath.
Observe: All details are based mostly on information stories I’ve learn as much as March 31, 2025, and my very own take as a blogger. Inventory investing’s dangerous, so do your homework earlier than leaping in.
