Fundraise, AGR clarity key for Vodafone Idea's next phase of recovery

Brokerages have mixed views on telco's operational performance

The stock of telecommunications service provider (TSP) Vodafone Idea (Vi) has risen about 19 per cent to ₹10.37 since the start of November. The gains were largely driven by the Supreme Court (SC) judgment allowing the central government to review and reassess Vi’s adjusted gross revenue (AGR) dues up to 2016–17, including interest and penalties.

 

This development is positive for the company, which is in discussions with the Department of Telecommunications (DoT) to resolve issues related to AGR liabilities. Other positives include stability in its subscriber base, an improvement in average revenue per user (Arpu) in the July–September quarter (Q2) of 2025–26 (FY26), and the funding of the remaining FY26 capital expenditure (capex) through internal accruals. 

However, for the stock to sustain gains from these levels, Vi will need to improve its operational metrics, raise debt to fund capex requirements in 2026–27 (FY27) and beyond, and secure resolution of the AGR issue. Most brokerages remain on the sidelines, awaiting progress on these fronts before turning constructive on TSP.

 

Brokerages have mixed views on Vi’s operational performance. While Q2 revenues benefited from a 1.6 per cent rise in Arpu to ₹167 — helped by an extra day and an improved subscriber mix — losses in the subscriber base capped overall sales gains. The company reported a subscriber loss of 1 million, down 0.5 per cent sequentially and 4 per cent year-on-year (YoY), bringing its total to 197 million. The average decline in the past four quarters was 3.1 million, though losses were limited to 500,000 in the April–June quarter of FY26.

 

Emkay Research observed that the recent decline of 1 million quarter-on-quarter (Q-o-Q) is much lower than the average 3.6 million Q-o-Q drop seen in 2024–25.

 

While there has been some improvement on the subscriber front, Vi still needs to expand coverage and network presence — and therefore capex — to reverse losses and win back customers. The company has launched 5G services in 29 cities across all 17 circles where it holds 5G spectrum and plans to expand further.

 

Capex was down 28 per cent sequentially, partly due to seasonality, though Vi maintained its FY26 guidance at ₹7,500–8,000 crore. While this will be funded by internal accruals, external fundraising (from FY27 onwards) remains critical for Vi to meet its earlier three-year capex plan of ₹50,000–55,000 crore, according to Motilal Oswal Research, led by Aditya Bansal.

 

Another key issue for the Street is net debt, which rose by ₹5,600 crore Q-o-Q to just under ₹2 trillion in Q2FY26. Most of the outstanding liabilities, including AGR and spectrum payments, are owed to the government. Following the SC judgment, the company — which had an AGR debt of ₹76,900 crore as of March 2025 — said it is in talks with DoT to resolve the matter.

 

While a resolution would reduce leverage to some extent, Vi’s current operating profit remains insufficient to service its remaining debt of ₹1.96 trillion (as of March 2025), especially considering its capex road map, analysts Pranav Kshatriya and Aryan Tripathi of Emkay Research point out. This calls for further capital infusion and/or relief on spectrum debt, they add. In the absence of clarity on this front and given the stock’s expensive valuation — 14.8 times FY27 enterprise value to operating profit — the brokerage has maintained a ‘sell’ rating with a target price of ₹6.

 

Motilal Oswal Research, however, has raised its FY26 through 2027-28 operating profit estimates by 2–6 per cent, citing improved cost efficiency in network operations despite accelerated 4G/5G rollouts. It has a ‘neutral’ rating with a revised target price of ₹9.5, seeing limited downside risk given the government’s continued support for Vi’s long-term survival.