Vodafone Idea Faces ₹70,000 Crore Blow: Sudip Bandyopadhyay Breaks Down Fundraising Challenges & Market Trends

“Vodafone Idea is facing two major issues. First, their financial situation. They raised funds through the FPO, and it seemed like things were improving. But when the Supreme Court rejected their petition, they were hit with over ₹70,000 crore in dues again. This is a massive setback for Vodafone Idea, and now they need to rethink their strategy to raise enough funds to cover these dues,” said Sudip Bandyopadhyay, Group Chairman of Inditrade Capital. Here are edited excerpts from his interview:

Interviewer: The Nifty Bank Index has been doing well, but PSU banking stocks haven’t moved much. What’s driving private banks, and why are PSU banks lagging behind? Do you think PSU banks will catch up soon?

Sudip Bandyopadhyay: The Banking, Financial Services, and Insurance (BFSI) sector is at a point where two key things are happening. First, interest rates are expected to fall soon. The US has already started cutting rates, and while we can debate whether India will follow in October or December, rates here will also decrease. When that happens, BFSI companies benefit because they can make extra profit during the lag between when rates drop and when they pass those lower rates to customers.

The more efficient banks and non-banking financial companies (NBFCs) will gain the most from this.

The second factor is that there’s tough competition for deposits. Banks need to gather low-cost deposits to keep up with the demand for credit. To do that, a bank must be efficient and have a wide network. If a bank can’t gather low-cost deposits, it will have to rely on high-cost deposits, which eat into profit margins, and investors don’t like that. That’s why large, efficient private sector banks, which can easily gather low-cost deposits, are performing better than public sector banks (PSUs), which are seen as less efficient in this area.

Interviewer: Vodafone Idea has been one of the week’s biggest talking points, with its stock falling sharply. We hear their management will hold a call on September 23rd. What’s your view on this stock, which is now trading below its FPO price of ₹11? What are investors looking for from management?

Sudip Bandyopadhyay: Vodafone Idea has two big problems. First, their financials. They raised funds through their FPO, and things were starting to look up. But the Supreme Court’s rejection of their petition brought back the issue of ₹70,000 crore in dues, which is a huge blow. Now, they have to figure out how to raise more money to deal with these dues.

The second issue is operational. Vodafone Idea has been losing customers every month. We thought things would stabilize after the FPO, but unfortunately, customer losses have continued. This is a serious issue because they need to keep and attract customers, but instead, they’re losing them. Management needs to explain how they plan to stop this trend, as it’s crucial to their survival.

Aside from customer retention, they also need to address fundraising. They’ll have to explore new ways to raise substantial funds to survive, grow, and eventually move their customers to 5G, which they haven’t fully planned for yet. Investors are eager to hear their strategy on these fronts.