Why Vodafone Idea's Shares Are Shooting Up Nearly 8% Today

Shares of Vodafone Idea were soaring on Thursday after the struggling telco reportedly secured a massive loan from India’s top private bank.

What Happened: HDFC Bank has lent ₹2,000 crore to Vodafone Idea, Economic Times reported, citing sources. This loan will help Vi meet its unpaid license fees and 5G spectrum payments amid signs of a potential equity investment by December.

The loan, which spans two years, was granted in mid-September, just before looming payment deadlines. Vodafone Idea has already cleared past license fee dues, with the total paid for fiscal 2022 and 2023 exceeding ₹350 crore and ₹1,700 crore for spectrum usage charges.

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Why It Matters: While a loan from HDFC Bank will calm some investors’ nerves, Vodafone’s primary lenders, led by the State Bank of India, are requesting more equity infusion due to Vi’s weak credit rating. They want more equity infusion before releasing further funds.

Vodafone had assured the telecom department that it paid 10% of license fees and spectrum charges for the quarter ended September 2023 and will make the rest by December, along with interest. Vodafone is actively negotiating with potential investors for equity funding in the current quarter.

Vodafone continues to stick to its payment schedule and has not defaulted, although its financial situation is challenging. If the firm keeps up with payments, the telecom department won’t use the bank guarantees. However, if it doesn’t meet its obligations, the guarantees will be cashed.

Price Action: Vodafone Idea’s share price jumped 7.42% to ₹13.75 in afternoon trade on Thursday.

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