Vodafone Idea shares: Investors dial into Vi after government takes call

Mumbai: Shares of Vodafone Idea jumped over 20% on Tuesday as the government’s decision to convert spectrum dues into equity eased investor concerns about the company’s prospects. Analysts said the likelihood of the stock logging more gains soon makes it a strong pick for punters, but investors would want to see more signs of a revival in business prospects to add it to their long-term portfolio.The government agreed to swap ₹36,950 crore worth of spectrum dues, including deferred dues repayable after the expiry of the moratorium period, into equity shares.

While this conversion in dues into equity is expected to provide cash flow relief for Vodafone, investors would turn bullish only if they see evidence of revival in subscriber base.

“Despite this development being positive in the short term, the falling subscriber base is a key concern to be monitored,” said Sneha Poddar, vice president – equity sesearch, Motilal Oswal Financial Services. “Unless that stabilises, upmoves are not expected to be sustained in the long term.”

This is the second time since 2023 that the government has announced the conversion of dues into equity.

“It has provided Vodafone Idea an opportunity to survive but doesn’t indicate a long-term turnaround,” said Siddhesh Mehta, research analyst, Samco Securities.”While a short-term rally is likely, the price is not expected to skyrocket, and the long-term gains are not expected as the company is losing subscribers instead of gaining new subscribers and doesn’t seem to have a clear map for profitability,” said Mehta. “Until these fundamentals improve, a turnaround is unlikely.”CLSA said Vodafone Idea is generating enough cash to fund its capital expenditure.

The brokerage said the company’s cash generation in the December quarter was ₹24.5 billion (₹2,450 crore), the highest since the merger of Idea Cellular and Vodafone India in August 2018.