Shares of Vodafone Idea Ltd opened 9.49% higher and surged nearly 20% on Monday's early after the government on Friday decided to convert company's accrued interest worth ₹16,133 crore on account of deferment of adjusted gross revenue (AGR) and spectrum dues into equity.
As a result, the government stake will be 33%.
ICICI Direct research in its report said that the key will be how quickly company raises fund as it has failed to pay its vendors, while lagging in network spends.
"We do not expect any major relief till a big fund raise or strategic investment is seen," said the brokerage.
At 9:41 IST, the shares of the company were trading 14.60% higher.
"After the key announcement on the stock by government, the stock has surged 10% in morning session , technically it's just a bounce that can extend in the near term, for long term trend need to understand if there is change in fundamentals," said Rajesh Bhosale, Equity Technical and Derivative Analyst, Angel One.
According to Prashant Tapse, Research Analyst and Senior Vice President Research of Mehta Securities, the reaction today is on the back of government converting Vodafone dues into equity stake in a relief package announced by the centre in Sept-2021.
Post conversion government has made it very clear in a media interaction that it has no desire to run the company and nor do they want a duopoly in the telecom market in India. The Government would act as a sleeping partner to support the company running the business. This action would help the business to improve in the tight competition against Airtel and jio. Raising funds to run the day to day business is the biggest challenge for Vodafone in the capital intensive business model and upgradation to 5G.
"I believe the challenge is going to increase more and more going forward with weaker than expected subscriber data. Time being the news is positive but poor business outlook and balance sheet would still be a concern for long term investors," added Tapse.