If you have paid attention to the ticker on a busy trading day, you may observe numbers flashing, orders getting filled, and the market has its share of ups and downs. But have you ever seen a single stock break records for trading volume? That happened with Vodafone Idea yesterday, April 25th, 2024.
Vodafone Idea (VI) shattered records on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) combined. A staggering ₹1,055 crore shares (over 1 billion!) were traded by the day’s end. This is three times the previous record of 308 crore shares held by VI just two days prior.
7 Reasons Behind the Share Trading Surge
- Price Rollercoaster: Vodafone Idea’s share price took investors on a wild ride. It skyrocketed 25% above the recent Follow-on Public Offer (FPO) price of ₹11, reaching a peak of ₹13.75 during morning trade. This initial jump likely triggered buying activity from those who saw an opportunity for quick profits.
- Government Reforms
The Indian Government’s recent telecom sector reforms, including tariff hikes, have instilled optimism about VI’s future. These reforms aim to improve the telecom industry’s financial health, potentially benefiting VI. - Renewed Investor Confidence
A major factor driving the surge is Vodafone Idea’s successful fundraising efforts. The company recently concluded India’s largest FPO, raising a whopping ₹18,000 crore. This impressive feat was backed by some of the country’s most respected institutional investors.
- FPO earned an overwhelming demand
It got subscribed a staggering 6.36 times on the final bidding day. The breakdown reveals a clear vote of confidence: qualified institutional buyers subscribed 17.56 times their portion, while non-institutional investors secured 4.13 times their quota. The retail segment also participated fully, with full subscriptions for their allocated shares.
- Strategic Investments
Vodafone Idea plans to strategically deploy a significant portion (₹12,750 crore) of the net proceeds from the FPO to bolster its network infrastructure. This includes establishing new 4G and 5G sites and augmenting the capacity of existing 4G sites.
6. Funding Network Expansion
The potential infusion of additional equity and possible debt raising could see Vodafone Idea raise a hefty ₹45,000 crore. This corpus could significantly narrow the current 4G gap with competitors like Reliance Jio and Airtel. This strategic move could not only stem subscriber losses but also expedite the migration of existing 2G users to the more lucrative 4G network. With direct tariff hikes also in play, VI’s Average Revenue Per User (ARPU) could ascend from ₹145 in Q3FY24 to a projected ₹241 in FY27.
7. Debt Reduction on the Horizon
A market section is cautiously optimistic about a favorable verdict in VI’s ongoing AGR curative petition. A positive outcome could alleviate 50% of the company’s hefty ₹70,000-crore Adjusted Gross Revenue (AGR) dues. The current target price for VI even factors in the possibility of ₹35,000 crore of government dues getting converted into equity
What does this mean for investors?
The recent surge in trading activity for VI highlights the dynamic nature of the stock market. While there are reasons for cautious optimism surrounding the company’s future, with a successful FPO, strategic network investments, and the potential for debt relief, significant challenges exist, such as the remaining AGR dues.
Conclusion
Only time will tell if VI can capitalize on the recent momentum and translate it into long-term success. If you’re considering investing in VI, or any stock for that matter, it’s crucial to do thorough research, understand the risks involved, and consult with a financial advisor before making any decisions.
*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.