Question - Answer Session

Q. Should you buy the shares of Vodafone Idea Ltd (Rs.8.95)?

Ans: There is no doubt that at the present it is more of a speculative counter than a fundamentally strong scrip. However there is a silver lining in the ☁️ cloud. Photo: The Economic Times.

Recently, there are media reports that the government of India might be announcing a package for the company. According to a report published in Mint: "The Union government is set to become the biggest shareholder of Vodafone Idea Ltd as early as next week, an official aware of the development said, as it converts dues owed by the country’s third-largest telco into a shareholding of about 33%".

In January, this year, Vodafone Idea Ltd (Rs.8.95) agreed to convert its dues of ₹16,133 crore into equity as part of the financial relief package offered by the government. After the equity conversion, the shareholding of Vodafone Group and Birla groups will drop to 50%, and a proportionate reduction will take place for the publicly held shares, according to Live Mint report on 20 May, 2022.

Moreover, on 13 May, 2022, there was a report in CNBC that On Friday, Vodafone Idea Ltd (VIL) and Ericsson stated that they had achieved a technological milestone in their continuing 5G testing, reaching a peak download speed of 5.92 gigabits per second. This is a great news for the shareholders.

Elaborating on the achievement, Jagbir Singh, Chief Technology Officer of VIL said, Given the growing consumer demand for immersive media and video streaming services, 5G speeds that we have demonstrated will help us prepare for the mobile broadband speeds and greater network capacity requirements of customers, as we ready for ’5G for a Better Tomorrow’ in India.

Besides, Vodafone Idea Ltd (VIL) has managed to sail through the March quarter (Q4FY22) with losses narrowing sequentially and the drop in subscribers being contained. VIL’s reported consolidated net loss of ₹6,563 crore is lower than Bloomberg’s consensus estimate. In Q4, subscriber loss was 3.4 million compared to 5.8 million in Q3. Tariff hikes in November have helped average revenue per user (Arpu) rise sequentially to ₹124 from ₹115 in Q3. This is quite encouraging.

Also, Vi’s plans to monetise ₹7,600 crore worth of assets is on the backburner on account of funding plans and government of India's much anticipated package.

In 2021, the company hoped to sell its fixed-line broadband subsidiary, along with its data centre businesses and optic fibre unit, to pay debt, spectrum and AGR dues.

Therefore, buy the shares of Vodafone Idea Ltd (Rs.8.95) near the CMP for short term targets of Rs.11/12.