Debt-ridden telecom operator Vodafone Idea is neither finding favour with investors nor brokerage houses. In fresh reports, foreign brokerage firms Nomura and CLSA have set their target price on the stock at Rs 5 apiece.
Following this, the stock took another knock on February 15. At 9:40 am, it was quoting at Rs 7.55 apiece on the NSE, lower by 2.5 percent. It had hit a 52-week high of Rs 11.65 in April 2022.
On Tuesday, Vi reported a widening of its consolidated loss to Rs 7,990 crore for the third quarter ended December 31, 2022. The company had registered a loss of Rs 7,234.1 crore in the same period a year ago.
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The company's total gross debt (excluding lease liabilities and including interest accrued but not due) as of December 31, 2022, stood at Rs 2.22 lakh crore, comprising deferred spectrum payment obligations of Rs 1.39 lakh crore and adjusted gross revenue liability of Rs 69,910 crore that are due to the government.
In this uncertain backdrop, Nomura states that a "large and quick fund raise" is now vital given the upcoming dues. According to reports, Aditya Birla Group is in discussions with banks to raise funds at a promoter level for an equity infusion into the company.
The group is reportedly looking to raise long-term debt and use preferential share allotment as its route, as per The Economic Times.
Also Read: Vi board clears debt conversion to equity. Govt to now hold 33.44% stake
Loss of subscribers is another pain point for the company. The overall subscriber base of the company declined to 22.86 crore during the reported quarter from 23.44 crore in the September 2022 quarter.
"Even though ARPU (average revenue per user) has improved to Rs 135, subscriber loss continues to be a significant challenge," notes CLSA. It has cut its forecasts for the company's FY23 and FY25 performance by 2-16 percent.
Both CLSA and Nomura have 'Sell' ratings on the counter with Rs 5 target on the stock, valuing the company at 11.5x FY25 EV/EBITDA forecast.
Domestic brokerage Motilal Oswal Financial Services has slightly higher target price of Rs 8 on the stock with a Neutral rating.
"The significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any source of ARPU increase," it notes.
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