Vodafone Idea to Raise $3.5 Billion: Industry to Take Another Hit Before Any Improvement

Vodafone Idea’s first quarterly financial report is out, and things are not looking good for the recently merged telecom operator. Listing the Ebitda of these companies, which is earnings before interest, tax, depreciation and amortisation the newly merged telco reported that it had EBITDA of Rs 977 crore for the quarter ending September, with the margins lying just at 8.1%. It’s noteworthy that in the pre-merger times, profit margins for the telcos were hovering around 26.5% and also profits were five times higher than the current figures. The former telecom leader, Bharti Airtel also reported margins of 21% in the same quarter.

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Vodafone-Idea Goes Extremely Thin on Capex

Crafting its statements to lean towards the company’s visions, Vodafone Idea is most likely to point out that the little profits are short-lived and that the advantage of the combined synergy of the two giants will overcome the situation soon. However, as per a mint report, even after the recovery, the profits of the company will be barely enough to meet interest costs.

Analysts have voiced similar opinions, as a person from Kotak Institutional Equities wrote in a note, “Current annualised Ebitda plus synergy gains could mean a baseline Ebitda of Rs 10,000-12,000 crore. This would not leave much to spend on capex after paying interest.”

However, things might be looking grim for Vodafone Idea as a quick look on the financials show that the Vodafone-Idea’s debt stands at ten times more than the Ebitda figures that the company has registered. Given this scenario, it’s the right time for the company to raise funds for capital expenditure. On the other hand, although Airtel is behind the telco in terms of revenue, its capex is two and a half times more than that of Vodafone Idea.