Vodafone Idea falls 9% as company likely fails to submit bank guarantees
Source: Business Standard
Vodafone Idea share price
Vodafone Idea shares dropped 9 per cent in the intraday trade on Monday, October 7, registering a low of Rs 8.91 per share. Vodafone Idea stock declined after the company missed the deadline to submit bank guarantees.
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A bank guarantee is a financial institution’s promise to cover a party’s financial obligations in a transaction if the party fails to do so.
As per reports, Vodafone Idea, a joint venture between Vodafone Group (UK) and India’s Aditya Birla Group, has received a notice from the Department of Telecommunications (DoT) as it failed to submit bank guarantees tied to previous spectrum auction dues.
The letter comes amid the ongoing discussions between the DoT and the Finance Ministry over a possible waiver of the bank guarantee requirement, though no decision has been reached, reports said.
Vodafone Idea missed the deadline for filing bank guarantees for auctions held before 2022. The corporation was due to submit these assurances in installments beginning September 20, but has yet to do so, resulting in the notice. READ MORE
Vodafone Idea’s moratorium on spectrum auction dues expires in September 2025, and the company must file bank guarantees at least a year in advance to ensure these payments. In the next few months, Vodafone Idea is anticipated to give bank guarantees totaling more than Rs 24,700 crore.
Earlier, Vodafone Idea demanded a waiver of these commitments. Although bank guarantees are no longer required for auctions held after 2022, existing regulations still demand them for spectrum purchased before that date. READ MORE
In a report dated September 24, ICICI Securities maintained ‘Hold’ on the Vodafone Idea with a target of Rs 11 per share.
The brokerage had said that Vodafone Idea is nearing the closure of debt funding of Rs 25,000 crore; and another Rs 10,000 crore for non-fund facilities that should help boost capex.
As per the report, the company has also signed deals with major equipment suppliers for Rs 30,000 crore, for radios to be supplied over the next three years; it expects capex to kick start from Nov’24. VIL also envisages another tariff hike of 15–20 per cent in 15 months.
In the past one year, Vodafone Idea shares have lost 18 per cent against Sensex’s rise of 24 per cent.
First Published: Oct 07 2024 | 1:44 PM IST
