Vodafone Idea Share Price: Will it touch Rs 20?

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Vodafone Idea

Vodafone Idea Share Price: What is happening?

Vodafone-Idea stocks are continuously declining since January 2018, when it was trading at its all-time high of nearly Rs 70 per share. After Yes Bank, it is another stock that has been a big wealth destroyer for investors. In the last 5 years, the stock has fallen close to 85%. 

The stock has fallen to as low as Rs 3.5 during the Covid crash. It did go to double-digit but failed to find a trigger to stay at those levels or grow further. Currently, the stock is trading at Rs 8.75 per share.

Quick fact: Vodafone Idea shares have remained under pressure in the year so far, losing more than 44% since January. 

Let's deep-dive into Vodafone Idea share price movement:

Vodafone Idea share price: What led to the fall?

Below are the top four reasons for the fall in Vi's share price:

  • Most of Vodafone Idea's problems are the result of Adjusted Gross Revenue (AGR) Payment. Vi owes the Indian government more than $8bn in cumulative fees for AGR and spectrum. It also owns $2.3bn in dues that will accumulate by April 2023, when it must commence repayments. 
  • In 2019, the Supreme Court announced its AGR verdict in favour of the government. It meant that Vodafone-Idea (and Airtel) had to pay or clear all dues related to AGR as soon as possible.
  • Vodafone Idea had accumulated debt from investments ploughed into infrastructure over the years. It has left them with a $30 billion drag on its performance. That, in turn, left it with a deteriorating network because of its inability to invest in new infrastructure.
  • The company has continuously lost subscribers since the launch of Jio. In many areas, users have complained of poor network and ported to a different network. It added to the financial woes of the company.

Vodafone Idea share price insight

Out of 1,240 trading days that Vodafone Idea has seen in the last 5 years, below are the Vodafone Idea share price movement insights:

  • Vodafone Idea share price ended in green on 506 trading days
  • Vodafone Idea share price ended in red on 665 trading days
  • Vodafone Idea share price remained unchanged on 79 days

Vodafone Idea share price: Update from Vodafone Idea's Apr-June 22 earnings

Net loss: Vodafone Idea reported a marginal decline in its consolidated net loss at Rs 7,297 crore as against a loss of Rs 7,319 crore in Q1FY22. Sequentially, the loss has widened.

Revenue: The revenue increased 13.8% to Rs 10,407 crore compared to Rs 9,144 crore revenue in the year-ago period. Sequentially, the revenue was up 1.7%. This is the highest revenue growth for the company post the merger of Vodafone and Idea.

ARPU: Average Revenue Per User for the June quarter increased 23.4% and stood at Rs 128 as against Rs 104 in the year-ago period.

Subscriber base: The subscriber base declined to 240.4 million customers at the end of the June quarter as against 243.8 million at the end of the previous quarter. Its 4G subscriber base grew by one million customers, and the 4G subscriber base now stands at 119.0 million.

Total debt: The company has gross debt (excluding lease liabilities and including interest accrued but not due) of Rs 1.99 lakh crore at end of the June quarter. It comprises deferred spectrum payment obligations of Rs 1.16 lakh crore and AGR liability of Rs 67,270 crore that is due to the Government and debt from banks and financial institutions of Rs 15,200 crore.

Should you Buy, Sell or Hold Vodafone Idea shares?

Despite narrowing of losses in the June quarter and a good jump in ARPU, analysts have retained a bearish view on Vodafone Idea citing higher subscriber churn and capex needs.

ICICI Securities: The domestic brokerage firm has retained a target price of Rs 9 on the shares. “The purchase of 5G spectrum ensures visibility for continued services and smooth technology transition for Vodafone Idea, which was our biggest concern. However, aggressive deployment of 5G is dependent on VIL’s ability to raise more capital; while peers are gearing up for faster 5G deployment in India," said the research firm.

IIFL Securities: The firm has a ‘Reduce; rating with a target price of Rs 5 on the shares. “In Apr-Mar 2023, Vodafone Idea would face Rs 300 billion cash payout in the form of an AGR payout, spectrum instalment from past auctions, regular capex  and  interest payments.  In  the  absence  of  a  significant  ARPU increase, the company could fall into a debt trap” said the research firm.

Motilal Oswal: 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, said Motilal Oswal. “The current low EBITDA would make it challenging to service debt without an external fund infusion. Assuming 10x EV-to-EBITDA with INR1,171b net debt, it leaves limited opportunity for equity shareholders. We assign an EV-to-EBITDA of 10x on a FY23E basis to arrive at our target price of Rs 11 per share, ” said the research firm, adding that it has changed its rating from ‘Under Review’ to ‘Neutral’.

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The stock recommendations in this blog are by the respective research analysts and brokerage firms. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.