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Vodafone Idea’s Surprising Stock Performance Despite Widening Q4 Losses

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By SK_INSIGHTMEDIA

Vodafone

Vodafone Idea’s stock gains despite a widening net loss in Q4 2024. Explore the company’s financial performance, strategic fundraising initiatives, and brokerage perspectives from Kotak and Citi, highlighting key factors shaping VI’s future in India’s telecom sector.

Introduction

Vodafone Idea (VI), a key player in India’s telecom sector, has been making headlines due to its financial performance and stock movements. Despite reporting a significant net loss for the quarter ended March 2024, the company’s stock has shown resilience and even gained traction. This blog delves into VI’s financial results, strategic initiatives, and brokerage perspectives that are shaping its market presence.

Financial Performance Overview

Q4 Financial Results

For the quarter ended March 2024, Vodafone Idea reported a net loss of Rs 7,674 crore, a notable increase from the Rs 6,418.9 crore loss in the same period last year. Despite this widening loss, the company’s revenue from operations saw a marginal increase to Rs 10,606 crore from Rs 10,531 crore year-over-year (YoY).

ARPU and EBITDA

A positive highlight in VI’s financials was the growth in its Average Revenue Per User (ARPU), which rose to Rs 146 from Rs 135 in the corresponding quarter of the previous fiscal year. This improvement was driven by changes in entry-level plans and subscriber upgrades. Additionally, VI posted its highest post-merger quarterly EBITDA of Rs 2,180 crore, marking a 5.4% increase YoY. The EBITDA margin also saw a slight improvement, rising to 40.9% from 40%.

Strategic Initiatives and Fundraising

Recent Fundraising Efforts

In its first earnings report following a substantial capital raise, Vodafone Idea highlighted its recent Rs 18,000 crore inflow from the largest follow-on public offering (FPO) in India. The company is actively in discussions with a consortium of banks to secure an additional Rs 25,000 crore in debt and up to Rs 10,000 crore in non-fund-based facilities. These funds are earmarked for capital expenditure (capex) projected to be between Rs 50,000 crore and Rs 55,000 crore over the next three years.

Capex Allocation

The planned capex will focus on expanding 4G coverage in 17 priority circles, launching 5G services in key cities, and enhancing network capacity to meet growing data demand. These investments are crucial for maintaining competitiveness and improving service quality in an increasingly data-driven market.

Brokerage Perspectives

Kotak Institutional Equities

Kotak Institutional Equities maintains a cautious stance on Vodafone Idea, reiterating a ‘Sell’ call with a fair value of Rs 10 per share. The brokerage notes that while VI’s high-risk, high-reward potential is evident, several factors must align for a positive turnaround. These include additional government relief measures, reduced competitive intensity, and effective execution by VI to halt subscriber losses.

Tariff Hike Projections

Kotak analysts are factoring in a 15% tariff hike in December 2025, up from their previous 10% estimate, alongside a 20% hike expected in June 2024 post the general elections. They emphasize that the continuation of the current market structure depends heavily on these tariff adjustments and further strategic shifts within the industry.

AGR Dues Waiver Potential

Kotak’s base case does not assume a waiver of Adjusted Gross Revenue (AGR) dues. However, they acknowledge that a potential Rs 35,000 crore waiver could add Rs 5 per share to their fair value estimate for VI.

Citi’s Bullish Outlook

In contrast, Citi presents a more optimistic outlook, predicting a potential 90% upside from VI’s previous closing price in a bull case scenario. Citi’s target price for VI stock is set at Rs 25, based on assumptions of significant tariff hikes (20% each), increased subscriber additions, and a substantial reduction in AGR debt by over 50% (Rs 35,000 crore). Additionally, they forecast a net debt/EBITDA ratio of 5x by FY28.

Market Implications and Future Prospects

Vodafone Idea’s recent stock performance, despite its financial challenges, underscores the complex interplay of market expectations, strategic funding, and competitive dynamics in the telecom sector. Investors and stakeholders are closely monitoring VI’s efforts to stabilize its financials and capture growth opportunities through strategic investments and tariff adjustments.

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conclusion

while Vodafone Idea faces significant challenges, its strategic initiatives and potential market shifts offer a complex yet intriguing narrative for investors. The company’s ability to navigate these hurdles will be pivotal in determining its long-term viability and market standing.

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Disclaimer: The opinions and suggestions presented in this analysis represent the viewpoints of individual analysts or brokerage firms, and not insightmediahub.com We highly recommend that investors seek guidance from certified experts before making any investment decisions, as market conditions are subject to rapid changes and individual circumstances may differ.

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