Vodafone Idea's Stock Jumps 7% Despite DoT's Demand, Mixed Brokerage Views: Here’s Why

Shares of Vodafone Idea Ltd jumped over 7% on Thursday, February 13 to hit the day’s high of Rs 8.99 and ending a three-day losing streak. The rally came after the telecom major told analysts that it would spend Rs 10,000 crore to expand its network by the end of March, nearly matching its total expenditure for the first nine months of the financial year.

During a post-earnings call with analysts, Vodafone Idea's CEO, Akshaya Moondra, mentioned that the management anticipates the completion of bank funding within the next 7 to 8 weeks.

He also said that the company has a closing cash balance of around Rs 18,000 crore as of June 30, 2024 and it was sufficiently funded to execute the capex plans in the interim.

According to various brokerage reports, the company management remains optimistic about persuading the Indian government to convert the remaining dues into equity.

Earlier, Vodafone Idea’s plea for a reassessment of its outstanding due was rejected by the Supreme Court of India. Currently, the company faces a liability of Rs 43,000 crore.

Moondra informed that Rs 17,000 crore of the total amount consists of deferred installments included in the telecom reforms package, which might be converted into equity. The remaining Rs 26,000 crore represents regular installment payments that would have been due regardless of the moratorium.

On Thursday, the stock settled at Rs 8.63, up 2.86% or 0.24 points on the NSE. On a year-to-date (YTD) basis, the stock has surged over 7.7%.

Stock Rises Despite DoT’s Bank Guarantee Demand

The rally came despite the Department of Telecommunications (DoT) demand for a Rs 6,090 crore bank guarantee before March 10.  

The DoT has directed Vodafone Idea to provide a bank guarantee of Rs 6,090 crore by March 10, according to a Moneycontrol report citing government sources. This bank guarantee is intended to cover a one-time payment shortfall for spectrum acquired after 2015, the report added.

However, the government has offered an alternative of making a cash payment of Rs 5,493 crore instead of furnishing the full bank guarantee. However, the company must choose between the two options and comply with the DoT’s directive.

Brokerage Views Mixed Weaker-than-Expected Q3 Results

In addition, brokerage views on Vodafone Idea Ltd are mixed following the telecom operator's weaker-than-expected results for the December quarter. Nomura India remains optimistic, projecting a 37% upside on the stock, while Motilal Oswal Financial Services (MOFSL) has downgraded it to 'Sell,' expecting the price to drop to Rs 5. Kotak Institutional Equities also maintains a 'Sell' rating with a target price of Rs 7. ICICI Securities, which holds a 'Hold' rating, reduced its FY25–27 EBITDA forecasts by 6-10%, but raised its target price to Rs 8 from Rs 7, highlighting debt funding and AGR resolution as crucial factors to watch.

The telco’s consolidated loss narrowed to Rs 6,609.3 crore in the quarter ended December 2024 (Q3 FY25) from Rs 7,715.9 crore in the previous quarter.

Revenue from operations for Q3 FY25 stood at Rs 11,117.3 crore, reflecting a 1.7% growth from Rs 10,932.2 crore in the previous quarter. Its average revenue per user (ARPU) was up at Rs 173 compared to Rs 166 in the September quarter.

Its earnings before interest, tax, depreciation and amortization (EBITDA) increased by 3.6% QoQ to Rs 4,712.4 crore in the reported quarter compared to Rs 4,549.8 crore. EBITDA margin improved to 43.2% from 41.6%, QoQ.