Vodafone Idea’s board approved a ₹20,000 cr fundraise. Then its stock crashed.

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₹20,000 crore through equity or equity-linked instruments, causing VIL’s shares to plunge almost 14% on Wednesday. What gives? One of the company’s promoters will participate in the proposed fundraise and is likely to invest about ₹2,000 crore. This means that 90% of the funding will have to come from external investors, on which there is insufficient clarity at the moment.

Sure, the fundraise was on the cards, and investors seemed to have factored that in, going by the 82% rally in the stock over the past six months (as of Tuesday). However, uncertainty prevails after the recent announcement, which perhaps explains the huge fall in VIL’s stock price on Wednesday. “VIL’s earlier attempts to raise funds have not been successful despite the company being in a better financial position than it is now," said Vivekanand Subbaraman, an analyst at Ambit Capital.

“Also, the funding announcement lacks details and thus investors are perhaps sceptical of VIL’s ability to raise funds," he added. VIL is also looking to raise funds via debt, and hopes to bring in ₹45,000 crore through a combination of equity and debt. If the company does manage to raise funds, it plans to expand its 4G coverage and roll out a 5G network.

If and when the fundraise goes through, the company will take another six to seven months to roll out 5G. Its peers Bharti Airtel Ltd and Reliance Jio have already rolled out their 5G networks. This network expansion could curtail the drop in VIL’s subscribers.

In the December quarter (Q3FY24), the company lost 4.6 million subscribers, compared to 1.6 million in Q2. However, average revenue per user (Arpu) grew 2% sequentially to ₹145, aided by a change in the entry-level plan and subscriber upgrades. Hemang Khanna,