As telecom major Vodafone Idea (VIL) opened its rights issue on Wednesday for the next two weeks with an aim to raise Rs 25,000 crore, sector experts say the fund would not be enough for the company given its high debt and the highly-competitive market.
In the meantime, Bharti Airtel too has announced that on April 24 its committee for fund infusion would decide on the shareholders who would be able to participate in its rights issue for around Rs 25,000 crore.
Analysts say Airtel is in a better financial position than Vodafone Idea and unlike the newly-merged entity, the amount raised from the rights issue by Sunil Bharti Mittal-led Airtel would be sufficient for the time being.
Vodafone Idea is offering 2,000 crore shares at a price of Rs 12.50 apiece. The entitlement ratio of the issue, which will close on April 24, has been fixed at 87 rights shares for every 38 currently held.
Under rights issue, existing shareholders are offered to purchase additional stock shares, known as subscription warrants, in proportion to their existing holdings.
In a rights offering, the subscription price at which each share may be purchased is generally discounted relative to the current market price. Rights are often transferable, allowing the holder to sell them in the open market.
“Vodafone idea is very stretched because their Ebitda has fallen to about $650 million(around Rs 4,495 crore), their debt is also quite high and their leverage as measured by debt-to-Ebitda too is high,” Nitin Soni, Director for corporate ratings at Fitch Ratings, told IANS.
He said that Airtel is a diversified company and has operations in Africa as well while Vodafone Idea is a telecom-specific company which has severely deteriorated its financials.
“In that light, their (Airtel’s) equity injection is sufficient and they are going to raise another $3 billion from African IPO and sale of assets, but for Vodafone idea it is insufficient and they might have to raise more money in future because their capex plan is about $3.5-4 billion,” Soni said.
He added: “They (Vodafone Idea) need to invest heavily to avoid any network congestion and their Ebitda has fallen much more than Bharti’s. So all in all they would probably need more equity, or stake or sale of other assets”.
According to the company’s promoter shareholders, Vodafone Group and Aditya Birla Group have confirmed their participation of up to Rs 11,000 crore and up to Rs 7,250 crore, respectively, in the rights issue.
“It is not compulsory that the rights issues of companies are fully subscribed over time, it is up to the market conditions and existing shareholders, and whether they rely on the management and the future expansion plans of the company,” said Manish Yadav, Head of Research, CapitalAim.
Amit Gupta, Co-Founder and Chief Executive Officer at Trading Bells, said the fund would work for two or three quarters but the company would require additional infusion after that.
“Vodafone Idea has a overall debt of Rs 1,23,000 crore with a gross debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) ratio of 33.30. After infusion of the equity capital through the rights issue, the debt would reduce to Rs 98,000 crore and its debt-to-Ebitda ratio would decline to 26.50 which would still be higher than that of its competitors Bharti Airtel and Reliance Jio,” Gupta said.
The company is also looking to sell its 11.5 per cent stake in Indus Towers in the next two to three months and raise around Rs 5,500 crore.
Off late, apart from loss in revenue, Vodafone Idea has also lost a large number subscribers to both Bharti Airtel and Reliance Jio.
Vodafone Idea, the largest telecom operator in terms of subscribers, lost 35.87 lakh users taking its total base to 41.52 crore while both Jio and Airtel added to their subscriber base.
From the industry perspective, Prashant Singhal, Emerging Markets TMT Leader at Ernst & Young, said that although the rights issue would help in reducing the debt, the sector being a capital intensive industry, companies would continue to need capital for expanding and investing their networks.
He said that rationalisation of tariffs, which are extremely low currently, would give a much-needed boost to the sector, apart from the capital infusion.
Dixon Technologies to set up unit in Karnataka: Deputy CM
Noida-based leading manufacturer of laptop, tab and other consumer electronic goods – Dixon Technologies (India) Limited – has come forward to set up a manufacturing plant in Karnataka, Deputy Chief Minister C.N. Ashwatha Narayana said here on Thursday.
Dixon Technologies (India) Ltd is an Indian electronics manufacturing services company and it is a contract manufacturer of televisions, washing machines, smartphones, LED bulbs, battens, downlighters and CCTV security systems for several multinational companies.
This company has manufacturing units in Noida, Dehradun and Tirupati, as well as the largest television, washing machine and bulb assembly plants in India.
Sunil Vachani, Executive President of the company submitted a proposal to Narayana, who holds the IT and BT portfolio, seeking land and other requirements to establish the unit. The company has sought 10-15 acres of land.
According to a statement released by the Deputy Chief Minister’s office, this project will be considered under the ambit of Electronic System and Design and Manufacturing (ESDM).
“Land parcels have been identified and will be given any one of the locations of Masthenahalli or Mindenalli of Kolara district, Haraluru of Bengaluru Rural district, Harohally of Ramanagar. As per the ESDM policy, the company will be eligible for the subsidy and other concessions if it establishes the plant outside the region of Bengaluru Urban district,” the Deputy Chief Minister explained.
Narayana also directed deputy commissioners to facilitate the company’s request and extend all help in attracting the investment and housing Dixon Technologies’ manufacturing plant in the state.
The statement added that the company which has a market value of over Rs 30,000 crore also makes Desktop Computers, CFL bulbs, LED TVs, CCTV, and washing machines.
Fuel price hike on hold for 3rd consecutive day
Oil marketing companies on Friday continued with their wait and watch strategy and kept the retail price of petrol and diesel unchanged for the third consecutive day.
Accordingly, petrol continues to be sold at Rs 90.93 a litre and diesel at Rs 81.32 a litre in the national capital.
Elsewhere in the country as well, fuel prices remained unchanged after oil companies increased the pump price on 13 of the last 18 days.
In the 13 increases since February 9, prices have gone up by Rs 3.98 per litre for petrol while diesel rate has risen by Rs 4.19 a litre in Delhi.
The price pause on Friday may be momentary as global oil prices are on the boil with benchmark Brent crude prices remaining above $ 66 a barrel. The product prices in the international market have also firmed up over restricted supplies and a demand pick up.
The increase of fuel prices in the previous weeks has taken petrol to cross historic high levels of Rs 100 a litre in several cities across the country.
In Mumbai, petrol price is just Rs 3 per litre short (Rs 97.34 a litre) of touching three digit mark of Rs 100 per litre for the very first time ever. Diesel price in the city is closing on Rs 90 a litre (Rs 88.44 a litre).
In all other metros, petrol is over Rs 90 a litre-mark while diesel is well over Rs 80 a litre. Premium petrol has crossed Rs 100 per litre-mark in several cities of Rajasthan, Madhya Pradesh and Maharashtra a few days back.
Since fuel prices are benchmarked to a 15-day rolling average of global refined products’ prices and dollar exchange rate, pump prices can be expected to remain northbound over the next few days even if crude price stabilises.
The petrol and diesel prices have increased 25 times in 2021 with the two auto fuels increasing by Rs 7.22 and Rs 7.45 per litre respectively so far this year.
Oil companies executives said that petrol and diesel prices may increase further in coming days as retail prices may have to be balanced in line with global developments to prevent OMCs from making losses on sale of auto fuels.
Mumbai Airport to reopen Terminal 1
With a view to safeguard health and safety of passengers in Covid-19 times, the Chhatrapati Shivaji Maharaj International Airport (CSMIA) will reopen its Terminal-1 (T1) for domestic flights from March 10, officials said here on Friday.
After the lockdown in late March 2020, T1 operations were suspended and were consolidated through Terminal-2 (T2) for convenience of passengers and stakeholders.
With the increasing number of Covid-19 cases in Mumbai and many parts of Maharashtra, the CSMIA is hopeful that it will ensure strict adherence to physical-distancing norms by all passengers.
From March 10, GoAir, StarAir, AirAsia and Trujet will resume all their operations from T1, while IndiGo’s base flight will be operated from here and other flights shall continue from T2.
However, the CSMIA officials assure that even at T1, passengers shall be able to enjoy the luxurious lounges, world-class retail, food & beverages, etc while complying with higher levels of safety and hygiene.
The airport will make all other arrangements at T1 like stringent screening of passengers, personnel, disinfection and sanitization, face-masks and other necessary PPE kits, physical distancing through rearranged seating, plexi-glass to minimize face-to-face interactions, encouraging contactless payments, etc.
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