Shares of Vodafone Idea extended their winning run to the second day on Friday, January 2, despite a ₹638-crore GST penalty order, as investors continued to cheer the sizeable promoter-led capital infusion aimed at strengthening its balance sheet and assessed the relief announced by the government for the debt-ridden telco.
Vodafone Idea share price jumped another 3% to hit the day’s high of ₹11.95 on the BSE in early morning trade. In the two trading days, the telecom stock has rallied 11%, recouping the sharp fall seen on Wednesday, following reports of a partial moratorium by the government on its adjusted gross revenue (AGR) dues.
In the last one year, Vodafone Idea shares have gained a substantial 47% amid optimism around a potential AGR dues resolution, meaningful improvement in ARPU and narrowing of losses.
Voda Idea faces ₹638-cr GST penalty
The company on Thursday evening (January 1) announced receiving a ₹638-crore GST penalty order from the Office of Additional Commissioner, Central Goods and Service Tax, Ahmedabad, on short payment of tax and excess availment of input tax credit.
In an exchange filing, Vodafone Idea said it does not agree with the order and will take appropriate legal action against the same.
Despite the tax order, announcements of a relief package and capital infusion by the promoters helped shore up confidence in the large-cap stock.
Cabinet relief measures, promoter infusion in focus
A PTI report, citing sources, stated that the Union Cabinet has frozen AGR dues of Vodafone Idea at ₹87,695 crore, which the struggling company now has to start paying from the 2031-32 fiscal and clear by 2040-41.
The frozen dues will be reassessed by the telecom department based on the ‘deduction verification guidelines’ of 2020 and audit reports, and the outcome will be decided by a government-appointed committee and be binding on both parties, the report further added.
Additionally, the company on Wednesday evening announced that it has reached an agreement with the Vodafone Group and executed an amendment to the original Implementation Agreement dated March 20, 2017, formalising the promoters’ commitment to infuse ₹5,836 crore into the company.
Under the approved structure, ₹2,307 crore will be infused in cash over the next 12 months, while the remaining ₹3,529 crore will be raised by the promoters through the sale of equity shares held by certain Vodafone Group shareholders.
The company further clarified that a portion of the contingent liability adjustment mechanism has been secured through the pledge of 328 crore equity shares by certain Vodafone Group shareholders for a period of five years.
Emkay Global retains ‘SELL’ on Vodafone Idea
Brokerage Emkay Global continued to maintain its ‘SELL’ rating on Vodafone Idea stock with a target price of ₹6, despite government relief packages, as it believes the company’s leverage remains high.
“We believe that the government is taking enough steps to ensure that the company remains solvent. However, to make VI a structurally strong company with manageable leverage, the government will need to make deeper reforms,” it said in a note on January 1. VI’s valuations at 13.6x FY27E EV/EBITDA are expensive, it added.
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