Citi shares Vodafone Idea’s bull case target price, says stars finally aligning for Vi

Foreign brokerage Citi said the stars are finally aligning for Vodafone Idea Ltd following the completion of its long-delayed equity raise. In its latest note, Citi said the government’s backing, which it views as much as possible to do what it takes instrumental to ensure that the 3-player industry structure, remains intact. It has been instrumental in setting up the company for the turnaround and a “fresh lease of life”, as KM Birla proclaimed, Citi said.

“We, too, are excited by recent developments, with the Rs200bn equity raise (+Rs250bn planned debt raise) enabling VI accelerate network investments and narrow the gap with peers on 4G coverage & 5G rollouts. A lot, however, still needs to fall into place, starting with (multiple) tariff hikes & arresting the subscriber decline, and ideally culminating in (some form of) debt relief, driving ‘High Risk’ rating.

Citi said it incorporated the equity raise and increased its FY25-26 Ebitda estimates by 5-18 per cent, introducing a base case target price of Rs 15 for Vodafone Idea.

Here the key underlying assumptions are ARPU increasing by 60 per cent over 4 years (from Rs 143 to Rs 230 over FY24-28E) backed by 15 per cent 4G tariff hikes each in 2QFY25E & 3QFY26E. Furthermore, it assumed implied revenue market share remaining stable at 16 per cent level and the government exercising the option to part-convert its dues into equity after the moratorium ends. Furthermore, it sees No AGR relief from the curative petition (pending in the SC).

Meanwhile, Citi suggested a bull case target of Rs 25 for Vodafone Idea. Key assumptions behind its bull case target included higher tariff hikes 20 per cent each), taking FY28E ARPU to Rs 250.