A day after shares of Vodafone Idea Ltd crashed 20 per cent on Dalal Street, a host of brokerages have come out with their target prices on the telecom stock.
In a big setback to Vodafone Idea Ltd (VIL), the Supreme Court on Thursday dismissed the requests for re-computation of AGR dues. The curative petition — filed by Vodafone Idea and other telecom companies — had sought a reconsideration of the 2019 judgment on AGR dues.
A few brokerages had in the past suggested that VIL needed three events to play out – capital infusion, tariff hikes and liabilities waiver. While the first two conditions have been met, liabilities waiver now appears to be off the table.
"The unfavourable Supreme Court verdict comes as a big setback to VIL. However, the sharp 20 per cent correction in the stock price, more or less captures the value of the incremental liability, over and above what the Street was expecting. Hereafter, the focus shall shift to VIL’s progress on key operational parameters – pace of subscriber loss, tariff hike impact and capex velocity," Nuvama Institutional Equities said.
The brokerage said it was adjusting the target price for the entire liability (Rs 70,300 crore) of AGR dues (earlier 50 per cent) and is maintaining its estimates for now and continuing to value VIL at 11 times Sep-26 EV/Ebitda. It reiterated ‘HOLD’ with a target price of Rs 11.50 against Rs 16.50 earlier.
Nomura India said the worst is now behind for Vodafone Idea following the conclusion of the overhang, and the sharp decline in recent weeks offers an opportunity to buy the stock. This brokerage suggested a 'Buy' on the stock against 'Neutral' earlier, with an unchanged target price of Rs 15.
"We note that the AGR outcome was a material overhang on VIL, and following the conclusion of this overhang, there is now incremental visibility on the way forward for VIL. Despite its large debt burden (but manageable with government support) in the coming years, VIL will be able to steadily repair and rebuild its business and partake in the robust outlook for the Indian telecom industry — which is underpinned by clarity on significant tariff hikes for the next two years and 5G monetization," Nomura India said.
Nomura India maintained its estimates, which factor in a 12 per cent ARPU hike and slowing subscriber loss trends for VIL over FY25-26 and a modest recovery in FY27, which it believes have upside risks. The brokerage expects VIL's Ebitda to record a 15 per cent CAGR over FY24-FY27F.
UBS suggested a fair value of Vodafone Idea between Rs 12 and Rs 24. The stock, it reportedly said, is marginally below its implied valued. The brokerage believes it does not rule out equity conversion or deferral of payments.