After a long time, good news has come for the shareholders of private telecom company Vodafone Idea. The company has been going through difficulties for a long time, the impact of which was clearly visible on its shares. But today Vodafone Idea shares rose by 13% to Rs 11.36 on BSE. Let us know why the shares of Vodafone Idea suddenly ran away so rapidly.
The struggling telecom company introduced a turnaround plan with a huge investment of Rs 45,000 crore for network expansion and faster marketing. The company assured that it will triple EBITDA and achieve double-digit growth in revenue between FY26 to FY29, which had a positive impact on its shares.
This rise in shares came when the company's management presented a three-year roadmap. The focus of this roadmap is to continuously add new subscribers, grow double-digit revenues and triple cash EBITDA. Under this, Rs 45,000 crore will be spent to rapidly expand the network infrastructure. A major part of this amount will be spent in the next 12 to 18 months. The objective of the capex plan is to create a 4G network at par with competitors in 17 major circles. Despite the enthusiasm in the market, global brokerage firms have different opinions on Vodafone Idea. Their target prices are between Rs 10 and Rs 14.
Citi Brokerage showed the most confidence and maintained the buy rating while keeping the target price at Rs 14. According to Citi analysts, factors like getting loans from banks and re-assessment of AGR dues can prove to be important for the stock in the near future. However, in the long term, the company's growth will depend on how well it implements its plan, whether tariffs increase in the industry or not and the competitive environment.
Citi also warned that cash flow will be fine for the next two years, but spectrum payments will increase significantly after FY29. In such a situation, the company may have to take steps like re-taking the loan, raising equity or changing the terms of payment of dues. According to the city, Indus Towers can benefit greatly from this entire process.
Bank of America Securities (BofA) took a negative stance on Vodafone Idea and maintained an underperform rating. BofA believes that among the three private telecom companies, VIL is the only company that can suffer the most loss in terms of subscribers and revenue. Moreover, he also sees little possibility of another major increase in tariffs. Even after the AGR relief, the company still has a total AGR liability of $9.53 billion, a major portion of which will have to be paid in subsequent years.
CLSA reduced its target price to Rs 11 from Rs 12, but maintained outperform rating. The brokerage said that the company is trying to raise loans for investment of about $ 5 billion in three years. Due to decline in subscribers, CLSA has reduced its estimates for FY26 to FY28. According to CLSA, if the tariffs increase and there is relief in AGR case, then the company can get big benefits. ICICI Securities maintained Hold rating with a target price of Rs 10. The brokerage said it has cut its EBITDA estimates for FY26 and FY27, but the target price has not changed due to the change in valuation method.
Vodafone Idea's turnaround plan got a boost when the government froze AGR dues at Rs 87,700 crore in 3QFY26 and gave a relief of 10 years. Now this dues are being recalculated, which is expected to provide more relief. Despite this, the debt burden on the company is still quite heavy. Total debt declined to Rs 2.09 lakh crore in 3QFY26, although this does not include lease liabilities. Spectrum related debt still accounts for about 60% of the total debt.
According to ICICI Securities, the company now wants to improve the situation by increasing investment in network and marketing. There is still a big difference between Bharti Airtel and Jio in terms of ARPU, to reduce which the company is focusing on converting premium customers and secondary SIMs into primary SIMs. According to the brokerage, now the focus will be on adding better quality subscribers, increasing postpaid users and shifting customers from 2G to 4G and then to 5G. Earlier, due to decrease in subscribers, the full benefit of increasing the tariff could not be achieved, which now needs to be rectified.
The biggest challenge is how Vodafone Idea will raise money for its big investment of Rs 45,000 crore. According to CLSA, the company is looking for a loan to raise $5 billion in three years. Citi says that the situation will remain stable for two years, but after FY29, the pressure on the company will increase due to increase in spectrum payments. In such a situation, he may have to take steps like refinancing the loan, issuing new shares or changing the terms of payment of the outstanding.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
