Vodafone Idea shares may reach ₹25 after Citi bull case projects 100% upside
Vodafone Idea shares may reach ₹25 after Citi bull case projects 100% upside
Shares of Vodafone Idea Ltd. snapped a four-day losing streak on Wednesday to surge 3% in trade after global brokerage firm Citi said the stars are finally aligning for Vi following the completion of its long-delayed equity raise.
The foreign broking firm said the government’s backing, which it views as tantamount to doing what it takes instrumental to ensure that the three-player industry structure, stays intact. It has been instrumental in setting up the company for the turnaround and providing it a “fresh lease of life”, as KM Birla proclaimed, Citi said in its note.
Citi is enthused by recent developments, with the ₹20,000 crore equity raise and more than ₹25,000 crore planned debt raise, enabling Vodafone Idea to accelerate network investments and narrow the gap with peers on 4G coverage and 5G rollouts.
“A lot, however, still needs to fall into place, starting with (multiple) tariff hikes and arresting the subscriber decline, and ideally culminating in (some form of) debt relief, driving our ‘High Risk’ rating,” Citi noted.
The brokerage said it is incorporating the equity raise and increased its FY25-26 EBITDA estimates by 5-18%, introducing a base case target price of ₹15 per share for the counter.
Key underlying assumptions, as per Citi, include average revenue per user (ARPU) increasing by 60% over four years, from ₹143 to ₹230 over FY24-28 estimates, backed by about 15% 4G tariff hikes each in the second quarter of FY25 and third quarter of FY26 estimates.
Besides, it assumed an implied revenue market share remaining stable at about 16% levels; and the government exercising the option to part-convert its dues into equity after the moratorium ends. Total government dues amount to ₹29,100 crore in the second half of FY26 and ₹43,000 crore per year from FY27.
The brokerage also sees no AGR (adjusted gross revenue) relief from the curative petition pending in the Supreme Court.
Citi expects its FY28 net debt/EBITDA estimates at 7 times; target EV/EBITDA of 11 times, in line with the multiple it has ascribed to Bharti, albeit based on FY28 estimates (discounted back) to capture operational recovery.
The brokerage, meanwhile, also suggested a bull case target of ₹25 for the Vodafone Idea stock.
Key assumptions behind its bull case target include higher tariff hikes of about 20% each, taking FY28 ARPU estimates to ₹250; higher subscriber additions; decline in AGR by over 50%, about ₹35,000 crore; and FY28 net debt/EBITDA estimates of 5 times.