It has been a long and arduous journey for Vodafone Idea (Vi) over the past few years as the debt-laden telco battled intense financial woes and subscriber losses. However, there seems to be light at the end of the tunnel as recent developments indicate the company’s turnaround plans are finally taking shape. Global investment bank Citi believes Vi’s shares have strong upside potential in the coming years as various positive factors align.
In a detailed note, Citi analysts outlined a bullish case where Vi shares could more than double from current levels to reach Rs. 25 per share. This would represent a 100% increase from the current trading price of around Rs. 12.50. The brokerage arrived at this optimistic projection after factoring in multiple assumptions around tariff hikes, subscriber additions, network investments and debt reduction coming to fruition.
Citi acknowledged there are still challenges but said the stars now seem aligned for Vi following the long-awaited equity fundraise of Rs. 20,000 crore. This cash injection will allow the telco to meaningfully step up 4G coverage expansion and begin 5G rollout preparations. The government’s continued backing was also highlighted, with its recent support seen as instrumental in ensuring India retains a three-player telecom market structure.
On the financial front, Citi expects Vi’s Average Revenue Per User (ARPU) to rise 60% over the next four years to Rs. 230 backed by tariff hikes of 15% every six months. Revenue market share is projected to remain stable at 16% while network investments are set to narrow the quality gap with rivals Jio and Airtel. The brokerage also built in assumptions around partial debt conversion by the government after moratorium.
Under its bullish case, Citi estimated even higher ARPU of Rs. 250 on the back of steeper 20% tariff hikes. This scenario also incorporates higher subscriber additions, 50% decline in adjusted gross revenue liabilities and strong network expansion pulling net debt levels lower. Such positive developments could potentially see Vi shares reaching Rs. 25, representing a doubling from current levels.
Of course, there are risks too like the pending Supreme Court verdict on AGR dues and potential delays in tariff increases. But after years in the doldrums, Vi finally seems to be getting its act together. With a stronger balance sheet and supportive government policies, the stage is set for an operational and financial turnaround. If Citi’s assumptions play out, Vi shareholders could be in for stellar returns over the next few years as the long-awaited re-rating gains momentum. Only time will tell how quickly the recovery story unfolds but investors now have reason to be optimistic.
