Shares of Vodafone Idea gained on May 17 even as the telecom operator reported a weak set of numbers for the quarter ended March 2024. Its net loss widened to Rs 7,674 crore in the quarter under review from Rs 6,418.9 crore in the year-ago period.
The company's revenue from operations, however, increased marginally to Rs 10,606 crore from Rs 10,531 crore in the same quarter last fiscal.
VI's average revenue per user (ARPU), which provides insights into the revenue generated from each user, grew to Rs 146 from Rs 135 in the same quarter last fiscal, primarily aided by changes in entry-level plans and subscriber upgrades.
The telco also posted the highest post-merger quarterly EBITDA of Rs 2,180 crore; up 5.4 percent on a YoY basis. Vodafone Idea's EBITDA margin improved marginally to 40.9 percent as against 40 percent in the year-ago period.
This is the telco's first earnings report after it raised Rs 18,000 crore through the largest follow-on public offering (FPO) in India. Sharing the update on debt fundraising, VI said it is in discussions with a consortium of banks to raise Rs 25,000 crore and additional non-fund-based facilities of up to Rs 10,000 crore.
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Vodafone Idea said that it will utilise equity funding, and debt funding including non-fund-based facilities primarily towards capex which is expected to be in the range of Rs 50,000 crore to Rs 55,000 crore over the next 3 years.
The capex will be towards expanding 4G population coverage in 17 priority circles, 5G launch in key cities/geographies, and capacity expansion to address the increasing data demand.
Brokerage calls on VI stock
Ahead of the March quarter results, Kotak Institutional Equities said Vodafone Idea's high-risk, high-reward optionality is in play but several things need to fall in place including further government relief measures, moderation in competitive intensity, and VIL's execution to avert further subscriber losses.
The telco's recent fund-raise ensures the continuation of the 3+1 market construct in the medium term, the brokerage said.
With easy subscriber gains from Vodafone Idea unlikely, other telecom operators' focus could shift from land grab to generating adequate returns through tariff hikes, according to analysts at Kotak.
They are building in a 15-percent tariff hike in December 2025 against 10 percent earlier, in addition to their expectation of a 20-percent tariff hike in June 2024 after the general elections.
"Our scenario analysis indicates a high risk-reward skew for Vi (bull-case FV: Rs 23; bear case Rs 7). However, long-term revival still hinges on government's relief measures and moderation in competitive intensity," the brokerage said as it reinstated the 'Sell' call on Vodafone Idea with Rs 10 fair value.
Kotak said it does not build in AGR dues waiver in its base case. But a potential waiver (Rs 35,000 crore) could drive Rs 5 per share upside to its fair value.
Also Read | Vodafone Idea Q4 results: Net loss widens to Rs 7,674 crore, ARPU at Rs 146
Meanwhile, earlier this month, global brokerage house Citi shared a bullish call on VI stock. After an 85 percent jump in Vodafone Idea in the last one year, the brokerage expects another 90 percent potential upside from the previous closing price in its bull case scenario for which it has a target price set at Rs 25.
The key assumptions behind its bull case include higher tariff hikes (20 percent each), taking FY28E ARPU to Rs 250; higher subscriber additions; decline in AGR debt by over 50 percent (Rs 35,000 crore); and FY28E net debt/EBITDA ratio of 5x.
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