The Vodafone Idea stock continues to be in focus. The share price has jumped 19% from Friday’s closing levels after the Govt decided to convert Vi’s upcoming spectrum dues repayment into equity. While the move no doubt brings about mid-term relief for the telecom major’s cash flow worries, the question is have the clouds of concern moved away? Key international brokerage houses have upgraded rating on Vodafone Idea and revised the target pice higher.
CLSA On Vodafone Idea: Upgrades to Outperform
CLSA has upgraded Vodafone Idea to Outperform from Underperform and raised the target price to Rs 10 per share from Rs 6 a share. According to them, after this stake buy Vodafone Idea’s total spectrum debt is estimated at $18 billion and AGR dues at $ 8 bllion. CLSA expects Vodafone ldea’s cash generation to fund its capex following the tariff hikes. Meanwhile the conversion of spectrum dues to equity takes care of repayments over the forecast period. “India mobile will remain a three private-player market. We upgrade Vodafone Idea based on a higher 10x EV/EBITDA expectation,” CLSA added.
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They pointed out that “Vodafone Idea’s Average revenue per user (ARPU) is up 57% to Rs183 from Rs 117 in Q1FY22, though it lost 56m subscribers to its current 200m.” Moreover, the telcom company’s bank debt is only $0.26 billion, and it can fund capex of Rs 10,000 crore annually from cash flows boosting 4G networks and 5G rollout. With the government converting spectrum dues to equity takes care of Videa’s debt repayment over our forecast period and India mobile will remain a three private player market.
Nomura On Vodafone Idea: Maintains Buy
Nomura calls this equity conversion as a “Much awaited positive.” According to them, the “debt conversion improves visibility for FY26 and eases the path for a debt raise.” The report stated that “outlookhas improved, but the future remains hinged on Vodafone Idea closing its debt raise soon, which we believe is essential for it to be able to invest in networks and return to a modest subscriber growth path.”
They have maintained a Buy rating on Vodafone Idea with expectation that the share price will shoot up close to 50% in one year.
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