Shares of Vodafone Idea rebounded on Friday after hitting a 52-week low, below ₹10, on the NSE and BSE at ₹9.79 each. The stock closed 1.35 per cent positive at ₹10.35 on the NSE, and at ₹10.48 flat on the BSE.
Vi shares plummeted nearly 20 per cent on Thursday’s trade to close at ₹10.38 on the BSE after the Supreme Court dismissed pleas filed by telecos seeking correction of alleged errors in the adjusted gross revenue (AGR). The move has invited mixed opinions from brokerages.
Brokerages divided
Analysts of Nuvama Institutional Equities stated that the unfavorable outcome of the SC verdict comes as a “big setback” to Vodafone Idea. The brokerage believes that the rejection of curative plea might also impede/delay the ₹25,000 crore debt raise that company’s management was targeting, after its recent ₹20,000 crore FPO.
Reiterating hold rating on the stock, Nuvama has revised the target price from ₹16.5 to ₹11.5.
Nomura, however, has upgraded its rating to ‘buy’ at a target price of ₹15 apiece, stating that the “AGR overhang concludes and the latest sharp correction with strong industry outlook provides an opportunity to buy. The brokerage is optimistic that Government support can materially ease the company’s funding gap.
Meanwhile, domestic brokerage JM Financial has maintained a ‘sell’ call on the stock stating that the company’s long-term sustainability is still contingent on significant favourable Government support in form of extension of moratorium and/or partial equity conversion of dues and sharp tariff hikes.
Global brokerage Goldman Sachs has retained its bearish stance on the stock with a sell call at a target price of ₹2.5. Another brokerage Macquarie has continued to see market-share erosion and meaningful equity dilution risk.
Citi and UBS have maintained their buy calls on Vodafone Idea at a target price of ₹17 and ₹12-24, respectively.
ARPU outlook
Nuvama observed that it would be tough for Vodafone to retain its subscriber base, thereby affecting ARPU growth and, in turn hurting cash flows. “With the recent tariff hikes, VIL also appears to be losing market share to BSNL,” it said.
Analysts of JM Financial mentioned that the company needs ARPU to jump sharply to ₹370 in FY27 against ₹146 in 1QFY25 so as to meet annual payment obligation of ₹43,000 crore assuming 70 per cent incremental EBITDA margin and 210 million subscriber base in 1QFY25.
Meanwhile, the Telecom Authority of India (TRAI)‘s monthly data released on September 20, 2024, showed that Vodafone Idea’s wireless subscriber base declined by 14.13 lakh users in July 2024 as against 8.60 lakh users in June 2024.
Bearish trend
The stock has exhibited a pattern of progressively higher highs and higher lows since 2019, according to Kapil Shah, Technical Analyst, Emkay Global Financial Services. The latest correction at 48 per cent indicates a weakened stock texture. “The potential support band is anticipated to be within the range of ₹7 to ₹6, while the stock is expected to encounter formidable resistance within the band of ₹12 to ₹12.5,” Shah added.
Vaishali Parekh, VP – Technical Research, PL Capital – Prabhudas Lilladher, affirmed that the stock has shown weakening signs. “On the weekly chart, it continues to find support at a cluster of moving averages. A close below ₹10 could further exacerbate this weakness, potentially dragging the price down toward the ₹8-7.50 range,” Parekh added.
Jigar S Patel, Senior Manager – Technical Research, Anand Rathi Shares and Stock Brokers, stated that the stock appears to be deeply bearish at this point, having decisively broken below its 200-day Exponential Moving Average (DEMA) on the daily chart.
“From a technical perspective, the Relative Strength Index (RSI) is in the oversold zone, which suggests a possible short-term rebound up to the 12 level. Moving forward, support is expected around 9, while resistance could be encountered near 12. Given the stock’s current bearish momentum, we recommend avoiding this counter as it remains under strong downward pressure,” Patel said.
