Geojit Financial Services has cut its target price for Vodafone Idea Ltd to Rs 8.60 against its earlier target price of Rs 17 set in August this year. The target price still suggests a 10 per cent upside over Tuesday's closing price of Rs 7.80 apiece.
While the recent hike in tariffs increased Vodafone Idea's average revenue per user (ARPUs), revenue rose only marginally. Vodafone Idea expects the impact of the tariff increase to continue to be seen in ARPU and revenue for the next two quarters, Geojit noted.
"However, it expects the subscriber base to grow with the expansion of its 4G coverage and roll-out of 5G in key geographies Q4FY25 onwards. Further, its fund-raising proposal through the issuance of equity share or convertible securities are expected to support its expansion plan as well as pay down debt," Geojit said.
The domestic brokerage has maintained its 'Hold' rating on the stock, with a revised target price of Rs 8.60, based on 11.9 times FY26E EV/Ebitda. Vodafone Idea shares are up 8 per cent in the past one month but have fallen 54 per cent year-to-date.
Last week, Vodafone Idea said it will incur Rs 50,000-55,000 crore of capex in the next three years, towards the expansion of 4G population coverage in 17 priority circles to improve competitiveness. It intends to offer 4G on sub-GHz 900 band in 16 circles for better coverage and experience. For 5G, it is looking at launch and expansion of services in key cities/ geographies.
Besides, the company said it would raise Rs 1,980 crore from its promoter Vodafone Group Plc by issuing fresh equity on a preferential basis, after the UK parent sold its residual stake in Indian telecom tower unit Indus Towers last week. Vodafone Idea will use the funds to clear a portion of its dues to Indus Towers.
Vodafone Idea's subscriber base declined to 20.50 crore in Q2FY25 from 21.98 crore in Q2FY24. However, the postpaid customer base increased to 2.45 crore from 2.310 crore, owing to the company providing a range of offerings to meet the requirements of the segment’s customers.
Nomura India last month retained its 'Buy' rating on Vodafone Idea with a target price of Rs 14. Nomura said it was factoring in a decline in pace of subscribers loss in FY26 and expects the telecom operator to return to a modest growth path in FY27, underpinned by investments for expanding 4G population coverage and 5G roll out.
While the foreign brokerage sees Ebitda for Vodafone Idea to compound at 14 per cent annually over FY24-27, it noted that its outlook for VIL remains hinged on VIL closing its debt raise soon, which is critically essential for the telecom company to be able to invest in networks and potentially return to a modest subscriber growth path.