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Vodafone Idea Rights issue - Leads to significant dilution
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What's the deal?

IDEA has announced issuance of equity shares on rights basis with 87 equity shares for every 38 equity shares held and issue price of 12.50 per share (massive 57% discount to CMP 29). Given significant discount to share price and higher share allocation, we expect existing shareholders to subscribe to the rights issue. The promoters will be willing to subscribe to unsubscribed portion, if any, and have already received permission from SEBI for the same. The total share count after the rights issue will increase to 28,735 from 8,735 currently.   

What is the purpose of rights issue?
By doing this rights issue, company is planning to be adequately funded over next two years.

Capex planning! (in INR cr)
Network Investments 27000
Spectrum Investments 21300
External Debt 13400
 
Sufficient funding?  
Rights issue 25000
Monetisation of Indus towers 5000
EBITDA accural 20000
Cash balance 13000
 
Impact on Stock price action
 
Stock is likely to remain under pressure due to this rights issue in short term. Given IDEA's underwhelming capacity expansion plans and high leverage despite capital infusion, realizing business synergies will not be an easy task. By doing this rights issue, Idea is creating a war chest for meeting debt obligations and planned network investments. It will be interesting to watch how this unfolds over next two years.
 

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