Business

Is Vodafone Idea India’s best penny stock?

In March, India’s second richest man bought Rs 10 crore worth of the stock at Rs 3.15 a share—it now trades at thrice that.
telecom

The Supreme Court had stipulated in October that all past dues of Vodafone Idea amounting to Rs 58,254 crore needed to be paid in three months, but the company has so far paid Rs 6,854 crore, including an instalment of Rs 3,354 crore on 17 March. Two weeks later, as the markets tanked following a national lockdown in the wake of the COVID-19 pandemic, noted investor and India’s second-richest man Radhakishan Damani bought Rs 10 crore worth of shares on the last day of March. A month later, the trading volumes in the stock picked up dramatically, with its price crossing double digits in early June after nearly a year.

The company’s valuation stands at Rs 28,000 crore today and Damani’s investment has tripled in value.

There is no evidence whether Damani has begun exiting his position, but his investment has attracted a lot of attention to the stock. There is chatter across equities blogs and websites that the stock will return multiple times over as the company improves its performance. There are three big factors that will determine this: Vodafone Idea’s overarching strategy, its ability to survive the onslaught of competition and, finally, the government’s need to have three private-sector competitors in telecom as against two to ensure a more healthy industry.

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Lead image by Alberto Adán from Pixabay.

The Morning Context has raised money from a clutch of investors, entirely in their personal capacity. It is quite likely that some of them may be directly or indirectly involved in a competing line of business similar to the companies we write about. Our full list of investors is here.

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