Speculative trade? Vodafone Idea shares swing between gains and losses

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26 Aug, 2025 12:21

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Shares of Vodafone Idea swung between gains and losses in intraday trade on August 23.

It jumped almost 8 percent in intraday trade on BSE on August 23 but soon cooled off to trade in the red.

It fell 2.5 percent only to gain strength again to end the day 0.33 percent higher at Rs 6.

The stock saw some buying interest in the morning after media reports suggested the government was not intending to merge the cash-strapped Vodafone Idea with state-owned BSNL and MTNL.

This government's stand on Vodafone Idea has come to the fore after Kumar Mangalam Birla - the Aditya Birla Group Chairman who owns around a 27 percent stake in the company - had offered to sell his stake to

the government to keep the company up and running.

The billionaire businessman made the offer in June in a letter to Cabinet Secretary Rajiv Gauba.

Brokerage firm Motial Oswal Financial Services in a report on August 16 pointed out that after the June quarter results, Vodafone Idea's net debt stood at Rs 1,90,670 crore with a cash balance of a mere Rs 920 crore.

"Gross debt (excluding lease liabilities) stood at Rs 1,91,590 crore, of which deferred spectrum debt is Rs 1,06,010 crore. AGR liability stood at Rs 62,180 crore, while bank debt stood at Rs 23,400 crore. This has increased by Rs 10,700 crore since Q4FY21 due to the accounting of interest accrued, but not due, towards deferred spectrum liabilities and AGR, and recent spectrum purchases," Motilal Oswal said.

The company's acute financial pain has kept the stock under severe pressure. Till August 20 close, the stock has lost 44 percent this year on BSE.

Most analysts advise staying away from the stock and find the occasional gains in shares as speculative trade.

"Given that Vodafone Idea is currently running on fumes, it appears that the spikes in its share prices are primarily due to the hopes of its shareholders," said Likhita Chepa, Senior Research Analyst at CapitalVia Global Research.

Motilal Oswal has a neutral call on the stock with a target price of Rs 5.

"The company's weak liquidity position may force it to rationalise network investments as is evident from reducing capex intensity and intensifying subscriber churn," Motilal Oswal said.

The brokerage firm added that the fall in subscribers and subsequently revenue is disproportionately hurting EBITDA due to the high fixed cost nature of the business, with inflationary cost increases. This is making any tariff hike too difficult to fill the gap of cash requirements.

"The significant amount of cash required to service its debt, leaves limited upside opportunity for equity holders, despite the high operating leverage opportunity from any source of ARPU increase. The current low EBITDA would make it a challenge to service the debt without external fund infusion," said Motilal Oswal.

"Assuming 9 times EV/EBITDA, with Rs 1,90,700 crore net debt (excluding lease liability and AGR debt), it leaves limited opportunity for equity shareholders," it said.

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