Vodafone Idea Ltd (VIL) recently reported its Q4 results, slightly missing analyst estimates. Despite this, analysts noted that the telecom operator is in a significantly better position compared to its pre-FPO (Follow-on Public Offer) status and is on a clearer path to survival. However, substantial improvements and strategic investments are necessary before it becomes a strong investment option. Here’s a detailed look at VIL’s current status and future prospects.
Q4 Performance and Analyst Perspectives
VIL’s Q4 results fell slightly short of expectations. Analysts have provided a ‘Neutral’ or ‘Hold’ rating on the stock, with target prices ranging between Rs 14-15. On Friday, Vodafone Idea shares closed at Rs 13.33, marking a 1.37% increase, indicating a potential upside of up to 13%.
Nomura India’s Upgrade
Nomura India upgraded VIL’s stock to ‘Neutral’ with a revised target price of Rs 15, up from Rs 6.50. The firm highlighted that while VIL still faces a long journey, it has navigated through significant challenges and is now preparing for more stable times ahead. Nomura’s valuation extends to March 2026 with an EV/Ebitda multiple of 15 times.
Nuvama’s Analysis
Nuvama emphasized three critical factors for VIL’s survival: capital infusion, liabilities waiver, and tariff hikes. The recent capital raise has achieved the first and paved the way for the second. Although VIL is still not completely out of the woods, it is on a trajectory towards becoming a viable entity. Nuvama maintains a target price of Rs 14, valuing the stock at 11 times FY26E EV/Ebitda.
Infrastructure Investments and Subscriber Trends
Vodafone Idea‘s gradual reduction in subscriber loss suggests that the consolidation of dual SIM cards is nearly complete. The loss of subscribers was primarily due to customers upgrading to 4G/5G handsets and VIL’s weak network coverage in peripheral areas.
Investment Plans
To address these issues, VIL plans to invest Rs 500-550 crore over the next three years in expanding 4G coverage, launching 5G services, and increasing network capacity. Despite these plans, VIL is still burdened with a debt of Rs 2.1 lakh crore, with annual repayments of Rs 43,000 crore starting from FY26.
Motilal Oswal Securities’ Insights
Motilal Oswal Securities noted that limited network investments have hindered customer experience, leading to subscriber churn. They project that network improvements may take 2-3 years to materialize, during which VIL aims to stabilize subscriber loss and grow its data subscriber base. The brokerage values the stock assuming a 14 times EV/Ebitda and foresees ARPU growth of 16% and revenue/Ebitda CAGR of 18%/27% over FY24-26. They reiterate a ‘Neutral’ rating with a target price of Rs 15.
Key Catalysts and Future Prospects
Several factors could drive VIL’s stock performance in the future:
- Tariff Hikes: An increase in tariffs could significantly boost revenues and ARPU.
- Reduction in AGR Liability: Lowering adjusted gross revenue (AGR) liabilities would alleviate financial pressure.
- Subscriber Retention: Stabilizing and growing the subscriber base through improved network investments.
Overall, while Vodafone Idea is on a more stable path, the journey ahead remains challenging. Substantial investments and strategic moves are necessary for it to emerge as a strong investment candidate. Investors are advised to watch for key developments and maintain a cautious outlook.
