Vodafone Idea Soars 10% as Govt Converts ₹36,950 Crore Dues into Equity; Citi Predicts 77% Upside
Vodafone Idea Soars :Vodafone Idea’s stock surged by 10% on Tuesday, reaching ₹7.80 per share on the National Stock Exchange (NSE), following the government’s decision to convert ₹36,950 crore worth of spectrum dues into equity. This move will make the Indian government the largest shareholder in Vodafone Idea (Vi), holding a 48.99% stake.
The development is seen as a crucial lifeline for the struggling telecom company, which has been grappling with financial distress for years. Citi, a leading brokerage firm, has reaffirmed its bullish stance on Vodafone Idea, assigning a ‘buy’ rating and predicting a significant 77% upside potential with a target price of ₹12 per share.
Government’s Equity Conversion: A Game-Changer for Vi
The government’s decision to convert dues into equity is a landmark move that provides much-needed relief to Vodafone Idea. This conversion not only strengthens Vi’s financial position but also enhances its ability to raise funds from banks and other institutional investors.
Citi Research emphasized the importance of this step, stating:
“In a material development that we view as having significant positive implications, Vodafone Idea announced on March 30, 2025, that the government has decided to convert part of its outstanding spectrum dues into equity.”
This transition comes after Vi successfully raised over ₹20,000 crore through its Follow-on Public Offer (FPO) in 2024, supplemented by additional capital infusions from its promoters. The fresh liquidity is expected to stabilize Vi’s operations and improve investor confidence.
Citi’s Optimism: Why Vodafone Idea Stock May Rally Further
Citi’s positive outlook on Vodafone Idea stems from several key factors:
- Reduced Financial Stress – The equity conversion alleviates significant debt-related pressure, allowing Vi to focus on growth and network expansion.
- Improved Cash Flow – The restructuring provides relief in the form of reduced immediate payment obligations, improving liquidity over the next three years.
- Potential Bank Loans – With the government’s backing, Vodafone Idea is better positioned to secure fresh loans for business expansion.
- 5G Expansion Plans – The company can now accelerate its 5G rollout, competing effectively with industry giants like Reliance Jio and Bharti Airtel.
With these positive tailwinds, Citi has set a price target of ₹12 per share, signaling a 77% upside from its previous closing price.
Impact on Indus Towers: A Major Beneficiary
Citi also retained a ‘buy’ rating on Indus Towers, India’s largest telecom infrastructure provider, setting a price target of ₹470, which suggests a 40.7% potential gain. Indus Towers has been financially strained due to Vodafone Idea’s delayed payments, but the brokerage firm believes the situation is set to improve.
Why Indus Towers Stands to Gain:
- Recovery of Dues – Indus Towers will likely recover its pending dues as Vodafone Idea stabilizes.
- New Tenancy Rollouts – The expansion of Vodafone Idea’s operations will lead to increased demand for Indus Towers’ infrastructure.
- Dividend Reinstatement – Improved cash flow could allow Indus Towers to resume dividend payments to shareholders.
Citi highlighted that Indus Towers remains its top pick in the telecom sector, expecting a 10% EBITDA CAGR (excluding writebacks) between FY25-27, driven by an 8% tenancy CAGR.
Vodafone Idea’s Financial Performance & Key Ratios
To provide a clearer picture of Vodafone Idea’s financial health, here are some key financial ratios:
| Metric | Value |
|---|---|
| Market Price (₹) | 7.80 |
| Target Price (₹) | 12 |
| Upside Potential | 77% |
| Govt Stake (%) | 48.99 |
| Debt (₹ Cr) | 1,98,000 |
| Revenue (₹ Cr) | 43,000 |
| EBITDA Margin (%) | 39.5 |
| Net Loss (₹ Cr) | 30,000 |
Conclusion: Is Vodafone Idea a Good Investment?
With the government’s equity infusion and Citi’s optimistic outlook, Vodafone Idea is at a crucial turning point. The company’s ability to leverage this lifeline for expansion and revenue growth will determine whether it can compete effectively with industry leaders.
Investors looking for high-reward opportunities may find Vodafone Idea attractive, given Citi’s 77% upside prediction. However, risks remain, including competitive pressure and execution challenges in 5G expansion.
Frequently Asked Questions (FAQs)
1. Why did Vodafone Idea’s share price rise by 10%?
The stock surged after the Indian government announced the conversion of ₹36,950 crore spectrum dues into equity, making the government the largest shareholder (48.99%).
2. What is Citi’s target price for Vodafone Idea?
Citi has set a target price of ₹12 per share, indicating a 77% upside potential.
3. How does the government’s stake impact Vodafone Idea?
The government’s 48.99% stake improves investor confidence, reduces financial burden, and enhances Vi’s ability to raise funds from banks and institutional investors.
4. Why is Citi bullish on Indus Towers?
Indus Towers, a major telecom infrastructure provider, stands to benefit as Vodafone Idea stabilizes. Citi has a target price of ₹470 per share, implying a 40.7% upside.
5. What are Vodafone Idea’s financial challenges?
Despite the equity conversion, Vodafone Idea still has a high debt burden (₹1.98 lakh crore) and faces intense competition from Reliance Jio and Bharti Airtel.
6. Is Vodafone Idea a good stock to buy now?
While Citi projects significant upside, investors should consider the risks, including intense competition, 5G rollout challenges, and long-term sustainability.
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like MoneyControl, ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.