Vodafone Idea extends rally, zooms 129% in 10 trading sessions

The stock is trading above its rights issue price of Rs 12.50 per share for the first time since July 5, 2019
Shares of Vodafone Idea continued their northward movement, and were trading higher for the 10th straight session on the National Stock Exchange (NSE). The stock price surged 20 per cent to Rs 12.60 on the NSE on Monday in the early morning trade.

In the past 10 sessions, the stock price of the telecom services provider has zoomed 129 per cent from level of Rs 5.50 hit on May 26, as compared to 12 per cent rise in the Nifty 50 index. It is trading close to its 52-week high of Rs 14 touched on June 6, 2019.

The stock is trading above its rights issue price of Rs 12.50 per share for the first time since July 5, 2019. Last year, Vodafone Idea had raised Rs 25,000 crore through rights issue, by issuing 87 rights shares for every 38 shares held by the shareholders.

The sharp rally in the past couple of weeks has been fuelled by reports that global technology giant Google is in talks to buy a 5 per cent stake in the company. The company, however, clarified on May 29 that it was constantly evaluating various opportunities but there was no proposal before the board of the firm as yet.

“As part of the corporate strategy, the company constantly evaluates various opportunities for enhancing the stakeholders’ value. As and when such proposals are considered by the board of directors of the company warranting disclosures, the company shall comply with the disclosure obligations,” Vodafone Idea said.

Meanwhile, influential brokerage CLSA on Wednesday issued a ‘buy’ rating on the stock as the foreign brokerage firm sees further upside from average revenue per user (Arpu) growth, likely adjusted gross revenue (AGR) resolution and potential floor tariffs. However, the stock has crossed the brokerage's 12-month price target of Rs 12.

"With the return of growth led by tariff hikes, Vodafone Idea promoters may assess incremental funding, irrespective of AGR cases outcome. Vodafone Idea’s Arpu Rs 109 is nearly 20 per cent lower than Airtel.," the brokerage said. It expects the company’s Arpu to grow by 30 per cent by FY22 underpinned by tariff hikes.

At 10:19 am, Vodafone Idea partially erased its morning gains and was trading 14 per cent higher at Rs 12 on the NSE, as against 1.4 per cent rise in the Nifty 50 index. A combined 780 million equity shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.


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