Why Vodafone Idea is in the news and what it means for shareholders
Namaskar dosto, Angel One ke iss podcast mein aapka swagat hai. I hope you all are doing well this IPO season. I am hoping ki aap hamare IPO content ka laabh utha rahe hain, and investing opportunities ko scope karke waste nahi kar rahe. Chaliye aaj ke mudde pe charcha karte hain.
Agar aap yahi pehli baar aaye ho toh, this is where we break down stock market concepts, news and well… everything in between… the idea is to discuss everything in a fun and straightforward manner taki aap jaise listeners apna investment journey shuru kar sake.
Dost aaj ka podcast topic bahut hi interesting hai kyunki headline-making news se related hai yeh.
Yeh podcast 5 parts ka hoga
First we will understand Vodafone Idea ka debt problem
Then we will talk about the headline making resignation that tanked the share price.
Phir dekhenge sarkar ke savior-wale moves
Yeh sab samajhne ke baad, dekhna hi padega what are your options as a shareholder
Aur last mein dekha jayega the telecom sector as an investment Avenue. Is this a Vodafone problem or a sector problem
Vodafone Idea ka debt problem
Yeh saara discussion Vodafone Idea ke unpaid dues ke karan ho raha hai. Kaun se unpaid dues, yahi soch rahe ho nah aap? Are we talking about taxes? Ji nahi. We are talking about AGR or adjusted gross revenue. Phir se greek bol raha hu, hai nah? Lekin I'm about to explain - be patient.
AGR is a revenue sharing model wherein the telecom companies need to share a percentage of their revenue with the government. Aha. Ab kuch toh samaj aa raha, right…
Aage badhte hai: Vodafone Idea ka AGR dues hai Rs 58,254 crores! Unho ne thoda bahut pay kiya hai - they have paid Rs 7,854.37 crores to the government jiska matlab hai ki abhi bhi inka debt Rs 51000 crores level pe hai. Yeh kaafi gehri debt hai; bahut bada problem hai.
Government ne kai maheene pehle telecom companies ko bata diya that they have a whole decade - maane 10 saal - to settle their dues.. actually 31 March 2031 tak time hai. Telecom companies need to pay up their dues in 10 installments by the deadline.
Toh why all the noise right now!
Vodafone Idea does not seem to have a POA with regards to settlement of dues. They approached the supreme court asking for the government to recalculate dues, lekin supreme court ne iss plea ko mana kiya hai.
Company ne koshish bhi kiya hai to raise the funds - Rs 25,000 crore raise karne ka plan jari hai september 2020 se, lekin company iss mamle mein unsuccessful raha.
Vodafone ka global parent company bhi paise dene ke liye tayaar nahi hai. They said that they "will not infuse any fresh equity."
Headline making resignation and corresponding share price drop
If all this wasn't enough, the company made headlines for all the wrong reasons when it's billionaire chairperson Kumar Mangalam Birla stepped down. Public ke liye yeh shayad sab se bada no confidence vote hai, of all the news around Vodafone Idea at this point in time.
On top of everything Kumar Mangalam Birla ne apnaya bhi hai ki Vodafone Idea is in hot water aur abhi doobne ki bahut possibility hai. Unho ne akbaar mein bol diya ki koi bhi investors capital dene ke liye tayaar nahi hai. Iska vajah yeh hai ki investors ko AGR liability aur moratorium (maane extension) on spectrum payments. Spectrum means all…because this Rs 58,000 crores is not the full extent of Vodafone Idea's debt. It also owes banks over Rs 20,000 crore and other liabilities worth over Rs 96,000 crores. Lease liabilities bhi hai lekin right now nobody is even talking about that.
There is a much bigger problem that Investors are finding hard to digest according to Kumar Mangalam Birla's parting words - yeh hai lack of clarity on how Vodafone plans to have a floor pricing regime that is above the cost of service. This last bit is the most alarming for those investing in the telecom sector. We'll discuss more about this in a few minutes.
Yeh sab hone ka baad Vodafone Idea share price dropped 26% in 2 days. Ever since the price has recovered very marginally. However it sits at about Rs 6 right now as compared to Rs 11 in February this year.
Government moves - solution kya hai
Sarkar ke paas bhi kam options hai
Option 1 - poore sector ko AGR dues ka discount de do… reliance ko bhi aur airtel ko bhi. Lekin this is a huge hit for the government
Option 2 - government takes over Vodafone Idea. Lekin isse Vodafone Idea ka poora debt sarkar ke kandhe pe pad jayega.
Option 3 - give the companies 20 years to pay off their dues
Option 4 - Vodafone Idea ko doobne do. Lekin isse 27 lakh subscribers ko bhi problem padega and this could affect business. Plus isse sirf 2 major telecom companies rahega desh mein, which is not a healthy situation.
What are your options as a shareholder
Agar aapne apna target earnings book kiya hai toh exit karne ke liye zaroor consider kar sakte ho
Agar entry karne ke liye soch rahe ho, this is probably not the time - especially for a beginner investor - kyunki aage bahut uncertainty hai
Agar aapke paas shares hai aur target earnings nahi mila hai toh consider your risk appetite - do you want to stay in the game?
The telecom sector
toh headline bana rahe hai lekin what about the other companies? Kya in ho ne apne AGR debt settle kiya hai?
ka dues tha over Rs 43,000 crore, jis mein se, company ne Rs 18,000 crore pay kiya hai aur almost Rs 25,000 crore dena baki hai. Better than Vodafone Idea, lekin not by much right?
ka dues tha almost Rs 17,000 crore jis me se company ne little over Rs 4000 crore bharr diya hai, leaving them to pay about Rs 13,000 crore.
Reliance Jio ka dues tha Rs 194.7 crore jo company ne pay kiya hai.
Vodafone Idea ke iss issue ne sabit kiya hai ki telecom companies have floor pricing that does not exceed their cost of service - how will they be profitable in the long run? Ideally before buying shares of Vodafone, investors should notice the gap between the forks liabilities and its revenue.
But there is a lesson in this - hamesha balance sheet theek se dekh ke invest karna important hain.
Dost this about sums up all you need to know about the Vodafone Idea. Stay tuned for more news based discussions and concept introductions. See you soon!
Jaane se pehle ek auur important baat. This podcast has been made for educational purposes only and the investor must do his own research as well.
Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. See you soon! goodbye and happy investing!