Vodafone Idea’s (Vi) stock has jumped more than 40% in the last few days. If you are an investor and thinking why a debt-laden company is getting this aggressively positive response from the market, it is because of multiple factors.
It all started with the relief measures for the telecom sector that the government announced a few months back. The moratorium on payments and redefining the adjusted gross revenue (AGR) dues helped the telco’s survival chance substantially. But when the government said that it is ready to take a part of Vodafone Idea’s stake if the telco doesn’t want to pay a part of its dues, it made Vi’s future in the country solid.
This meant that the telco wasn’t going anywhere, even if it didn’t make a single rupee. But this was not all.
Vodafone Idea Benefitted from Prepaid Tariff Hikes, BGs Return
Vodafone Idea recently implemented prepaid tariff hikes of up to 25% on its plans. This is going to help the telco in raising its average revenue per user (ARPU). Then on top of this, the government has announced that it is returning bank guarantees (BGs) to the tune of Rs 12,000 crore to Vodafone Idea.
This changes a lot of things for the company. The telco will be in a much better position to pay all the short-term dues as well as be able to push the money into its 4G networks to improve coverage.
Then add to this the expected investment that the company is going to get. There were reports citing that Kumar Mangalam Birla will invest $150 million into the company through his personal assets. Further, the Vodafone Group Plc is reportedly planning to raise capital by selling a stake in Indus Towers and then using that cash to invest in Vodafone Idea.
All of this took the telco’s stock to hit its 52-week high figure on Monday.