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Vodafone Idea shares slumped more than 11 per cent on Wednesday, a day after it announced fundraising plans.

Vodafone Idea shares were trading at Rs 13.98, down 11.91 per cent on BSE.

The much-awaited capital raise by Vodafone Idea is crucial as it is essential to ensure immediate liquidity and facilitate the expansion of the network, Motilal Oswal Financial Services said in a report.

The company still holds a debt of Rs 2.1 trillion with an annual installment of Rs 430 billion from FY26 onwards. This looks challenging against FY24 EBITDA of Rs 84 billion.

The significant amount of cash required to service debt leaves limited upside opportunities for equity holders, even with the potential operating leverage benefits from any increase in ARPU. Given the current low EBITDA, servicing the debt without external funding will be challenging. Assuming a 14x EV/EBITDA ratio, coupled with a net debt of Rs 2.1 trillion, leaves limited opportunities for equity shareholders, the report said.

In line with management statements over the past 4-6 quarters regarding the fund raising, the Vodafone Idea Ltd (VIL) board has approved an equity fund raise of up to Rs 200 billion, with participation from the promoters. The total fund raise, comprising both equity and debt, amounts to Rs 450 billion. It is expected that the equity fund raise will occur in the next quarter. However, post moratorium ends in FY26, the company’s annual obligation would be Rs 430 billion vs EBITDA of Rs 84 billion, presenting a significant risk, the report said.

Upon completion of the fund raise, the company will have the capability to invest in the expansion of its 4G network and deployment of 5G technology. The shareholders meeting will be held on April 2 and post shareholder approval, the company expects to finalise the equity fund raise in the coming quarter, the report added.

The absence of these investments posed a risk for VIL, causing a shift of its premium subscribers to Bharti/RJio networks and has adversely impacted VIL’s network capability, consequently leading to elevated customer churn. The infusion of funds (equity + debt) will bolster the company’s network infrastructure, the brokerage said.