Vodafone Idea Ltd. share price target

Debt to equity conversion should aid deleveraging efforts. However, IDEA needs to work on increasing net additions and reducing churn rate of existing base. Hence, we provide HOLD rating on the stock with a rolled forward TP of Rs. 11.8 based on 9.7x FY24E EV/EBITDA. Topline sees small gains; Margins shrink on higher costs Q3FY22 consolidated revenue grew 3.3% QoQ to Rs. 9,717cr (-10.8% YoY) aided by gradual enhancement in ARPU levels (+5.5% QoQ to Rs. 115). However, overall subscriber base declined further to 247.2mn (vs. 253mn in Q2FY22), with the blended...

About the stock: Vodafone Idea (VIL) is India's third largest telecom operator with ~24.7 crore wireless customers in India. Given the balance sheet stress and delayed 4G network expansion, it lags the key listed peers in terms of 4G network coverage, ARPU and margins...

VIL posted a pre Ind AS 116 EBITDA of INR16.2b v/s INR14.1b QoQ (5% above our estimate) on the back of a 5.5% increase in ARPU, led by the recent tariff hike, which resulted in a higher churn at 5.8m. The recent government moratorium has partly offered it some respite from its repayment woes, but it has ceded 35% equity stake to the government for just the interest component, with its net debt ballooning to INR1,975b. The much awaited capital raise remains critical to provide immediate liquidity, given the low EBITDA of INR104.1b (pre-Ind AS 116) in FY23E even...

Following Bharti and after months of expectation, VIL finally announced a tariff hike to the tune of 20% across its price plans, effective from 25th Nov'21. It is now important for RJio to follow suit to ensure sustainability of the tariff hikes. VIL's ARPU, which stands at a mere INR109 (40% below Bharti), given the higher proportion of customers on lower base plans, could see a big push, provided it doesn't see a huge market share loss. This hike, catering to ~70% of its revenue pool, can potentially...

Despite deferment of AGR & spectrum dues, company's outlook increasingly looks uncertain. In the absence of a much needed capital infusion by the promoters, strengthening of subscriber base and substantial improvement in ARPUs is required in the coming months for the company to continue as a going concern. We downgrade our rating...

About the stock: Vodafone Idea (VIL) is India's third largest telecom operator with ~25.5 crore wireless customers in India. Reported revenues were up 2.8% QoQ to | 9,406 crore. ARPU grew ~5% QoQ to | 109, as the company had increased the entry level prepaid pricing plan from | 49 to | 79, in a phased manner, as well as increased the tariffs in some postpaid plans. The subscriber base decline was a controlled at ~2.4 million (mn) to 253 mn, with churn rate reducing to 2.9% (vs. 3.4% in...

VIL posted an in line adjusted EBITDA of INR14.1b (excluding INR1.5b one-offs on a pre-Ind AS 116 basis) v/s INR12.8b QoQ on the back of a 5% improvement in ARPU. The improvement was led by a pickup in economic activity and easing of lockdown-related restrictions, tariff improvement, and mix benefit, which offset the 2m subscriber decline. The moratorium offered by the government for AGR and deferred spectrum payment has addressed part of the repayment woes. VIL is in talks with banks to fund its upcoming repayments of: a) INR60b in NCDs...

Amidst liquidity pressures, declining subscriber base and lower ARPU, it is yet to be seen how the company will manage its debt servicing in the coming quarters. Given existing uncertainties, we remain cautious on the stock and maintain our HOLD rating with a revised target price of Rs. 7.0 based on 7.8x FY23E EV/EBITDA. Continued de-growth in subscribers and ARPU impacts topline Revenue fell 14.1% YoY to Rs. 9,152cr in Q1FY22 (-4.7% QoQ), on account of the slowdown in economic activity due to lockdown restrictions during the second wave...

Adjusted EBITDA (excluding one-offs on pre Ind AS 116) stood at INR12.8b v/s INR17.1b QoQ. This was attributed to the sharp subscriber churn due to the COVID-led lockdown and fall in ARPUs. With EBITDA (pre-Ind AS 116) of INR38.5b in 2HFY22E, it will be challenging to invest in growing its network and service upcoming repayments of: a) INR64.7b NCDs in FY22, b) INR82b deferred spectrum payment, and c) AGR installment. A capital raise or government relief package remains critical to provide immediate liquidity support to service the ballooning net debt of...