Why Vodafone Idea Share Price is Falling

Long-term investing can be a profitable strategy, but it may not be suitable for every stock. Anyone who had a position in Vodafone Idea shares would have experienced this firsthand.

After the merger in mid-2018, Vodafone Idea's stock price was trading in the range of Rs 50 to Rs 70.

However, the price plummeted to below Rs 10 within a year, and at one point, the stock was trading at Rs 3.4 per share, almost qualifying it as a penny stock based on its price levels.

Vodafone Idea has faced the challenges of operating in a high-cost industry with narrow profit margins. Further, the longstanding legal issues have added to its woes, resulting in an over 85% decline in share prices over the past five years.

Recently, the company's shares took another hit, with its share price falling below the Rs 6 mark on 28 March 2023, marking a new 52-week low.

Let's find out why this underperforming stock is dealt with another setback again.

#1 Shop shutdown risk amid tariff hike delay

Financial analysts estimate that the Indian telecom sector may delay the tariff hike until the General Elections in 2024. The earlier tariff hike was slated for September 2023.

Due to this, many analysts believe that debt-ridden Vodafone Idea could face severe consequences if the tariff hikes are not implemented, leading to a possible shutdown of shops shortly.

The company is already facing stiff competition from its rivals, Jio and Airtel. While the competitors have launched 5G, Vodafone Idea is still waiting for fundraising to place orders for 5G equipment.

In the absence of tariff hikes, the company won't be able to keep up with the investments required and launch 5G services.

It would then result in subscriber loss, making fundraising even more challenging for the company.

Analysts further project a potential cash shortfall of approximately Rs 55 billion (bn) for Vodafone Idea in the next 12 months, speculating a cash crunch for the company.

Following the developments on Tuesday, the telco's shares fell below Rs 6.

#2 Fundraising woes continue

Vodafone Idea has been unsuccessful in raising funds, despite prolonged efforts. The telco had cited the government's delay in converting dues to equity as the reason for the setback in securing investments from external investors.

But now, it would be close to two months since the equity conversion happened, and there has been no progress on fundraising.

It is to be noted that the Aditya Birla Group (ABG), one of the telco's promoters, had promised to bring in new investments for the company, leading the government to approve the equity conversion.

This delay in raising funds has further affected the company's 5G plan for 2023, driving down the customer base of the company.

This has exerted additional pressure on the firm's near-term prospects, leading to a downward trajectory of the stock.

How Vodafone Idea shares have performed recently

Vodafone Idea shares have declined by more than 12% in a month. Over the past week, the company's shares are trading lower by 9%.

So far in 2023, shares of the company have eroded over 26%.

Vodafone Idea touched its 52-week high of Rs 11.6 on 8 April 2022 while it touched a 52-week low of Rs 13.3 on 28 March 2023.

About Vodafone Idea

Vodafone Idea is an Aditya Birla Group and Vodafone group partnership. It's among India's leading telecom service provider.

The company provides pan India voice and data services across 2G, 3G, and 4G platforms.

On 31 August 2018, Vodafone India merged with Idea Cellular, to form a new entity named Vodafone Idea.

Vodafone currently holds a 45.1% stake in the combined entity and Aditya Birla Group holds a 26% stake.

On 7 September 2020, Vodafone Idea unveiled its new brand identity, 'Vi' which involves the integration of the company's erstwhile separate brands 'Vodafone' and 'Idea' into one unified brand.

The company is developing infrastructure to introduce newer and smarter technologies, making both retail and enterprise customers future ready with innovative offerings.

For more details about the company, you can have a look at Vodafone Idea's factsheet and Vodafone Idea's quarterly results on our website.

You can also compare Vodafone Idea with its peers.

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