Vodafone Idea’s share price has been on quite the rollercoaster recently. After touching a new 52-week low of ₹9.79 on Friday, the stock managed to jump back and close at ₹10.52 on the NSE, which is making a 7.50% rise from its low point.
What Happened?
The recent drop was largely because of the Supreme Court’s judgment not to give relief on the Adjusted Gross Revenue (AGR) dues.
This made a strong sell-off, causing the stock to its lowest point in a year. But savvy investors saw an option and started buying at these lower levels, which helps the stock recover by the end of the day.
Market Outlook and Predictions
According to global brokerage firm Nuvama, the market hadn’t factored in any upside from the Supreme Court’s judgment.
They believe Vodafone Idea still has strong fundamentals and support from the Government of India (GoI), which could help in filling the funding gap.
Nuvama is happy, anticipating that the worst is over for Vodafone Idea and that the share price could reach ₹15 in the medium to long term.
Triggers for Vodafone Idea Shares
- Supreme Court Decision: The Supreme Court ignored Vodafone Idea’s plea for ease on its AGR dues, which amount to ₹703 billion. This led to a sharp 20% drop in the stock price as the market had anticipated some relief.
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- Government Support: Nuvama highlights that Vodafone Idea has support from the GoI. They anticipate the company to make ₹224 billion in EBITDA by FY26, which will help meet part of its government dues. The company also plans to restore some of its dues into equity, reducing the repayment load.
- Future Projections: By FY27, Vodafone Idea is anticipated to make ₹261 billion in EBITDA. Payments to the government will increase to ₹430 billion, but the company plans to convert ₹170 billion of these dues into equity, managing the rest through its EBITDA.
Has the Worst Passed?
Nuvama believes that the AGR issue was an important overhang on Vodafone Idea. With this now fixed, there’s more visibility on the company’s future.
Despite its large deficit, which is manageable with government support, Vodafone Idea desires to fix and rebuild its business. The Indian telecom industry has a strong view, driven by expected tariff hikes and 5G monetization.
Share Price Target
Nuvama values Vodafone Idea using the EV/EBITDA methodology, arriving at a target price of ₹15 per share. This means a possible upside of more than 40% from the current market price of ₹10.52.
Final Thoughts
Vodafone Idea’s recent price movements have been affected, but the future looks hopeful. With strong government support and a clear path forward, the company is poised for recovery.
Investors might consider this an opportune moment to buy into the stock, mainly because of the possibility of some gains.
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Disclaimer
The information provided in this article is for informational purposes only and should not be taken as financial advice. Stock market investments are subject to risks, and it is recommended that readers consult with certified financial professionals before making investment decisions.