Vodafone Idea
The shares of telecom sector giant Vodafone Idea have once again become volatile. Investor interest has increased after the bullish report of global brokerage Citi, in which a possible rise of up to 38% has been estimated. The company has got direct relief of about Rs 16,500 crore from AGR relief. However, risks still remain.
Vodafone Idea has once again come on the radar of investors. The recent Citi report has created a positive environment in the market regarding the stock. The brokerage has set a target price of Rs 14 for the company's shares, which indicates a potential upside of about 37-38% from the current level.
The biggest reason behind this rise is believed to be the relief given in the long pending AGR dispute. The government has re-evaluated the AGR dues to around Rs 64,000 crore, which is about 20% less than the company's earlier estimate. According to the company, the AGR outstanding is Rs 80,500 crore, according to which it has got a relief of about Rs 16,500 crore. This has brought clarity about the liabilities of the company and future financial planning can become easier. According to the report, no additional interest will be charged on this dues and long term relief has also been given for payment. Moratorium of about 10 years and payment plan between FY36-41 is being considered a big relief for the company.
Citi says that the company's valuation is based on the EV/EBITDA model, in which a 12x multiple has been imposed on the expected FY28 earnings. However, considering the heavy debt of the company, this multiple has been kept lower than other competitors. Despite this, the risks have not completely disappeared. The debt pressure on the company's balance sheet still remains and government support will be necessary to handle it. Besides, the company is also facing the challenge of increasing competition in the telecom sector, limited increase in tariff and retaining customers.
