Brokerages in wait-and-watch mode on Vodafone Idea, some see limited upside

Vodafone Idea reported a consolidated net loss of Rs 6,432 crore in the first quarter of the financial year 2024-2025.

Brokerages held ratings steady for beleaguered telecom player Vodafone Idea as its earning show for the June quarter came in below estimates.

Vodafone Idea reported a consolidated net loss of Rs 6,432 crore in the first quarter of the financial year 2024-2025 on the back of 4G subscriber additions. The telco has reported a net loss of Rs 7,840 crore in the year-ago period.

Revenue from operations was down 1.3 percent to Rs 10,508.3 crore from Rs 10,655.5 crore in the June quarter. The ARPU was Rs 146 in the quarter, up 4.5 percent YoY from Rs 139, primarily due to a change in the entry-level plan and subscriber upgrades.

At 9.20 am, VI shares were quoting Rs 15.56 on the NSE, higher by 0.6 percent.

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However, a lot needs to fall into place, for it to become an investible idea for us, said Nuvama Institutional Equities. The brokerage maintained its hold rating, with a target price of Rs 16.5 apiece.

"The capital raise has led to some respite as the long pending capex and continuous subscriber churn were hurting its operating performance. With the fundraising, the capex was directed towards the rollout of 4G and 5G. We broadly retain our estimates. Assuming a 15x EV/EBITDA and a net debt of Rs 2 lakh crore, there is limited opportunity for the stock," stated Motilal Oswal. The brokerage reiterated its neutral stance, retaining its price target of Rs 15 per share.

On the other hand, international brokerage Citi maintained its buy call on Vodafone Idea, but slashed its target price to Rs 22 per share, down from Rs 23 apiece.

The brokerage noted that Vodafone's subscriber losses were stable, and that the topline slipped below its expectations. The miss on subscriber numbers was attributed to flat ARPU, as compared to the projection of a slight improvement.

However, Citi noted that the net loss narrowed on a sequential basis, coming ahead of its expectations. The net loss narrowed led by higher income from other sources, such as the equity raise and lower interest expenses.

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