Vodafone Idea’s financial position remains precarious to say the least. Many on Dalal Street have pronounced it all but dead. But buy-sell data of mutual funds for June is throwing up some interesting trends.
HDFC AMC and Aditya Birla MF, who are among top five fund managers in the country by assets, have bought Vodafone Idea’s shares. A couple of more prominent fund managers have also added the stock to their portfolio.
HDFC AMC bought 1.41 crore shares of the beleaguered telecom company in June. Vodafone was its biggest buy of the month in terms of the number of shares. Aditya Birla MF bought around 19 lakh shares of the company. It is possible that buying the stock is not an active call for these fund houses, which may be owning it as part of their arbitrage funds or midcap index fund, of which it is a part.
During the same month, the auditor of the telecom operator raised concerns over its ability to remain a ‘going concern’ due to a streak of losses. Huge bank debts have also not helped the firm. Voda Idea has been struggling to raise funds, which has led to severe cash crunch.
The company has reported losses for 11 consecutive quarters now. In the past 19 quarters, it has reported profit only once, data available with Accord Fintech showed as losses mounted to a total Rs 1,39,220.7 crore.
The two key reasons behind Vodafone’s losses are backbreaking statutory dues, which it is yet to pay in full, and consistent loss of users, who have migrated to rivals Bharti Airtel and Reliance Jio.
Share price of Vodafone Idea has plummeted to single digits, with many analysts predicting further fall. Currently, the stock trades around Rs 9 a share, just a shade of Rs 100-110 that it used to trade at in 2013.
But it seems some fund managers believe the company will come out of the crisis successfully. The government has said in the past that it wants to maintain the three-private-player structure in the telecom sector, but has not shown any willingness to relent on the AGR dues.
Besides HDFC AMC and Aditya Birla MF, fund managers at DSP Mutual Fund and Motilal Oswal MF have also bought shares of the company. DSP’s Vinit Sambre-led team bought 2.4 crore shares of Voda Idea in June while fund managers at Motilal Oswal purchased 2.26 lakh shares.
HDFC AMC and DSP Mutual Fund declined to comment on individual stocks in their portfolio. Representatives of Aditya Birla MF and Motilal Oswal AMC could not be reached for a comment.
However, not every fund manager has a favourable view on the stock. Some seem to be in a hurry to exit the company as they feel the risks are too much compared with the possibility of rewards.
Fund managers at Edelweiss Financial Services sold 3.35 crore shares of the firm in June, followed by 2.83 crore by Kotak MF, 1.82 crore shares by UTI MF, 97 lakh shares by ICICI Prudential MF, 50 lakh shares by SBI MF and 14 lakh shares by Nippon India MF.
Telecom stocks have underperformed the broader market in the ongoing rally. Bharti Airtel and Jio operator Reliance Industries have gone up just 6 per cent this year, while Voda Idea is down 11 per cent.
Even after the sector has gone through massive consolidation, the telcos have not got the pricing power that was expected. Analysts and company managements, both had expected a tariff hike this year, which has not materialized yet. However, money managers are upbeat on the stronger players from the sector.
“We are down to three players, and I do not see any reason why our mobile bills should remain as low as they are. We feel such a strong consolidation will eventually lead to higher pricing power. Equity investment is the long-term game and we have all the ingredients for the telecom companies to do well in the future,” Anand Shah, the head of PMS at ICICI Prudential AMC, said in a recent interaction.