Vodafone Idea Rights issue - Leads to significant dilution

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.

Author Image


Recent Post

  • PC Jeweller Demerges its Expo..

    What’s the deal? PC Jewelers recently announced that it would demerge its Export Division and merge with its wholly owned subsidiary - PCJ Gems & Jewellery Limited. Company c..

  • Insurance- Introduction

    Risk and uncertainty are associated with life in some of the other ways. These risks and uncertainties are increasing daily because of the increment in the speed of life. For example, i..

  • Rail Vikas Nigam Ltd. IPO

      Offer Details Price band Rs 17-19 Per Equity Share Offer Open Date Mar 29, 2019 Offer Close Date Apr 03, 2019 Lot Size..

  • Tech Mahindra Buyback

    The Board of Directors of Tech Mahindra Ltd. approved a share buyback for its investors on Feb 21, 2019. The details of the buyback include: Ex-Date: March 5th, 2019 Record Date: Marc..

  • BHEL Buyback

    The Board of Directors of BHEL approved a share buyback for its investors on Oct 25, 2018. The details of the buyback include:  Record Date: November 6th, 2018 Buyback price: Rs...