Vodafone Idea Enters Single Digit Mark; RSI Slips Below 20

Vodafone Idea Slips into Single Digit Territory

Shares of Vodafone Idea Ltd. (VIL) faced a significant fall on Monday, dropping by 9% to hit their one-year low of Rs 8.90. At its last trading price of Rs 9.10, the stock remained 7% lower for the day and has now declined by 43% on a year-to-date (YTD) basis.

This sharp decline comes on the heels of a notice issued by the Department of Telecommunications (DoT), citing non-submission of required bank guarantees related to past spectrum auction dues. The notice pertains to guarantees from auctions held prior to 2022, which Vodafone Idea, a joint venture between the UK’s Vodafone Group and India’s Aditya Birla Group, failed to provide on time.

Technical Signals Show Weakness

The stock’s recent performance has been weak, with today’s fall extending its decline for the fifth straight session. The 14-period Relative Strength Index (RSI) for Vodafone Idea has slipped below the 20-mark, indicating oversold conditions. The stock is also trading below its 20-day moving average (DMA), further signaling bearish sentiment.

New Network Deal for Growth

Recently, Vodafone Idea has taken steps towards future growth by concluding a significant deal worth Rs 30,000 crore with Nokia, Ericsson, and Samsung for the supply of network equipment over the next three years. The partnership aims to support its ongoing network upgrade plans, with Nokia and Ericsson remaining long-standing partners, while Samsung has been added as a new supplier.

Investment Plan to Boost Coverage and Capacity

This milestone is part of Vodafone Idea’s larger three-year capital expenditure plan, valued at Rs 500 crore. The primary goals are to expand 4G population coverage, launch 5G services, and enhance capacity to cater to the growing data demands. This planned capex is expected to boost Vodafone Idea’s operational cash flow, with a considerable part directed towards meeting government obligations.

The company’s bank debt stands at a relatively low level of around Rs 48 billion, and even with new debt fundraising, the cash required for debt servicing is projected to remain manageable. This approach is designed to position Vodafone Idea as a stronger player in India’s telecommunications sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.