Vodafone Idea shares fall 2% as ICICI Securities cuts target price

ICICI Securities has reduced Vodafone Idea's EV/EBITDA multiple to 13 times FY27 from 14 times and lowered its target price to Rs 11 from Rs 15.

In Short

• Vodafone Idea shares dip over 2% post target price cut
• AGR dues dispute remains unresolved despite government engagements ongoing
• ICICI Securities slashes Vodafone Idea target price to Rs 11

Vodafone Idea shares declined over 2% after ICICI Securities slashed its target price, citing concerns over the company's financial outlook.

At 11:36 am, shares of the telecom operator were down 2.03% at Rs 10.60 on the Bombay Stock Exchange (BSE).

Following an analyst call with the management, ICICI Securities noted that Vodafone Idea remains hopeful of resolving an "arithmetical error" in the calculation of its Adjusted Gross Revenue (AGR) dues.

The telecom operator is currently engaging with the government on the matter, despite the Supreme Court's rejection of its curative petition regarding these dues.

According to ICICI Securities, Vodafone Idea believes its case has strong merit, and discussions with the government have been encouraging. The company is factoring in the conversion of Rs 29,000 crore of government debt into equity at the end of the moratorium period under the recent telecom reform package.

While Vodafone Idea has not included AGR relief in its business recovery plan, ICICI Securities moved its estimate of AGR relief worth Rs 35,000 crore from FY25 to FY26. This shift, along with the delayed capex acceleration, resulted in revised net profit projections for FY25–27E, although its EBITDA estimate for the same period remains unchanged.

Given the rising uncertainty surrounding the AGR resolution, ICICI Securities reduced Vodafone Idea's EV/EBITDA multiple to 13 times FY27 from 14 times and lowered its target price to Rs 11 from Rs 15. The brokerage maintained a 'Hold' rating on the stock. Meanwhile, Motilal Oswal Financial Services (MOFSL) has a target price of Rs 12 and a 'Neutral' rating.

ICICI Securities also noted that Vodafone Idea is close to finalising Rs 25,000 crore in debt funding, with an additional Rs 10,000 crore for non-fund facilities, which should bolster its capex efforts.

The telecom firm has signed agreements with major equipment suppliers for Rs 30,000 crore worth of radios, set to be delivered over the next three years. Capex is expected to begin in November 2024, alongside a potential tariff hike of 15–20% over the next 15 months.

Meanwhile, Motilal Oswal Financial Services (MOFSL) highlighted that despite the company's high operating leverage, the significant cash required to service its debt limits the upside potential for equity holders. The conversion of unpaid installments into equity post-moratorium could start by FY26/FY27, further affecting the company's financial structure.

MOFSL projects a revenue/EBITDA CAGR of 11% and 31%, respectively, from FY24 to FY26. Based on an EV/EBITDA multiple of 14 times and factoring in net debt, the brokerage set a target price of Rs 12. It emphasized that reducing subscriber churn could act as a key catalyst for the stock, reaffirming its 'Neutral' stance.