Cabinet waives huge bank guarantee against previously bought spectrum; Vodafone Idea gains up to 18%

Telecom stocks are in focus in Monday's session (November 26) trade as the Union cabinet gave a go-ahead to the proposal for removing bank guarantee (BG) requirement for spectrum purchased pre-2022.

Amid the development, telecom stocks saw traction and mostly traded in the green. At the last count at around 9:29 am, shares of beleaguered telecom company Vodafone Idea were locked in 10 per cent upper circuit at Rs 7.67 per share, while the other service provider Bharti Airtel traded with mild gains of 0.4 per cent at Rs 1,586 per share on the BSE.

Bharti Airtel in the last one year has zoomed 63 per cent, while Vodafone Idea has delivered a negative return of 43 per cent.

Cabinet decision on bank guarantee for spectrum purchase pre-2022

In a bid to provide relief to the ailing companies in the sector, the Cabinet has done away with the need to deposit huge bank guarantee in lieu of the previously purchased spectrum. As per sources, telecom companies owe a combined total of Rs 30,000 crore bank guarantee.

Reportedly, Vodafone Idea owes Rs 24,600 crore in bank guarantee, while the bank guarantee due for Reliance Jio and Bharti Airtel is to the tune of Rs 4,000 and Rs 3,000 crore, respectively.

Also Read: Anil Singhvi Market Strategy November 26: Important levels to track in Nifty50, Nifty Bank today

Anil Singhvi's view on telecom stocks

Zee Business Managing Editor deems the news to be good for telecom players and the news will augur well across players. Further, he said that the news will be life-saving for Vodafone Idea.

The news will also be positive for other players including Indus Towers, Bharti Hexacom and Bharti Airtel.

The expert suggests to buy Vodafone Idea Futures for targets of Rs 7.25, Rs 7.4 and Rs 7.5, keeping stoploss of Rs 6.65. Similarly he has adviced to buy Bharti Airtel Futures for a target of Rs 1,605 and Rs 1,620-with a stop loss of Rs 1,562 per share.