Brokerages Remain Positive on Vodafone Idea

Following the centre's decision to convert Vodafone Idea’s outstanding spectrum dues into equity shares, several brokerages have remained optimistic on the stock. The shares of Vodafone Idea surged by 20% on April 1.

As per the development, the government's stake in Voda Idea will increase to 49% from 22.6%. The telecom company will issue 3,695 crore equity shares with a face value of Rs 10 each. The move is expected to lower the outstanding debt on Voda Idea's books.

Here’s what brokerages have to say about the stock

Nomura

The brokerage said that the government’s decision will ease concerns over the telecom operator's repayment concerns and improves outlook for any future debt raise. In a note it said, “We note that VIL was liable to pay Rs 61,000 crore in spectrum dues over FY26-28F, however, following the government's action, the dues have declined to approximately Rs 20,000 crore over the period.”

Nomura added, “Our calculations indicate VIL will need to secure debt funding of approximately Rs 40,000 crore over FY26-27F to manage its dues and capex plans…We believe the finalizing of the equity conversion will likely enable a faster turnaround on securing incremental capital.”

While maintaining ‘buy’ rating on the stock it reduced the target price to ₹10 from the earlier ₹12 apiece. It said, “We believe the outlook for VIL has improved, but the future remains hinged on VIL 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.”

Citi

Citi maintained a ‘buy’ rating on the stock by setting a target price of ₹12 per share, implying an upside potential of nearly 76% from the previous closing price.

Though immediate financial burden on Vi has been relieved, the telecom player will face issues in raising fresh funds to expand its 4G and 5G networks.

Motilal Oswal

Motilal Oswal called the action by the government a ‘key medium-term positive’ for Vodafone Idea, however, added that “stabilization of its subscriber base, long-pending debt raise, and further relief on AGR dues remain vital for Vi’s long-term survival”.

“Vi remains a high-risk high-reward play. We raise our target price to Rs 6.5 per share, from Rs 5 earlier, driven by Government of India’s equity conversion at a premium,” said Motilal Oswal. The latest target price however implies a downside to the current market price.