Tue Sep 24 08:51:28 UTC 2024: ## Vodafone Idea Shares Drop on ICICI Securities Downgrade

**Mumbai, India** – Shares of Vodafone Idea Ltd. (Vi) plunged over 2% on Wednesday after ICICI Securities slashed its target price, citing concerns over the company’s financial outlook. The brokerage firm revised its estimates following an analyst call with Vi’s management.

Vi remains hopeful of resolving an arithmetical error in the calculation of its Adjusted Gross Revenue (AGR) dues, but the Supreme Court’s rejection of its curative petition casts a shadow of uncertainty over the matter. Despite this, Vi claims to be having encouraging discussions with the government and is factoring in the conversion of Rs 29,000 crore of government debt into equity at the end of the moratorium period.

While Vi has not included AGR relief in its business recovery plan, ICICI Securities shifted its estimate of AGR relief worth Rs 35,000 crore from FY25 to FY26. This, along with the delayed capex acceleration, resulted in revised net profit projections for FY25–27E, though the EBITDA estimate remained unchanged.

Due to the rising uncertainty surrounding the AGR resolution, ICICI Securities reduced Vi’s EV/EBITDA multiple to 13 times FY27 from 14 times and lowered its target price to Rs 11 from Rs 15. They maintained a ‘Hold’ rating on the stock.

Meanwhile, Motilal Oswal Financial Services (MOFSL) also has a ‘Neutral’ rating on Vi, with a target price of Rs 12. They highlighted that despite Vi’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 impacting the company’s financial structure. MOFSL projects a revenue/EBITDA CAGR of 11% and 31%, respectively, from FY24 to FY26.

Vi is close to finalizing Rs 25,000 crore in debt funding, with an additional Rs 10,000 crore for non-fund facilities. The company 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.

Both brokerages agree that reducing subscriber churn could be a key catalyst for Vi’s stock performance.

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