Vodafone Idea up 33% this month: What's behind the rally?
What's the story
Vodafone Idea's shares have witnessed a major spike, rising as much as 7% in today's trading session. This is the third gain for the stock in four sessions and it has risen by over 33% since September 4 when it was trading at around ₹6.6. At the time of writing, Vodafone Idea shares were up by 4% at ₹8.73 apiece. But what's behind this sudden rally?
Legal developments
Government backs Vodafone's AGR relief plea, agrees to find solution
The surge in Vodafone Idea's shares comes after the Supreme Court agreed to hear the company's plea regarding some of its adjusted gross revenue (AGR) dues. Last Friday, during a hearing, the government said it does not oppose Vodafone Idea's AGR plea but wants a solution as an equity holder in the company. The matter will now be heard on Friday, September 26.
Stake details
Government converted dues into equity
The government converted some of Vodafone Idea's dues into equity, raising its stake to 49% in the debt-laden telecom operator. This makes it the largest shareholder in the company. However, multiple officials from the telecom ministry, including Telecom Minister Jyotiraditya Scindia, have clarified that they don't plan to raise their stake beyond 49%.
Broker analysis
Citi terms Vodafone Idea shares a 'high-risk' buy
On Monday, Citi brokerage firm termed Vodafone Idea's shares a "high-risk" buy with a price target of ₹10. The recommendation came after the Supreme Court admitted Vodafone Idea's latest AGR plea and the government expressed its support. This has increased the chances of potential relief for the company, according to Citi's note. With total AGR liabilities nearing ₹2 trillion, Vodafone Idea warned the added claims threaten its survival, 198 million subscribers, and over 18,000 jobs.