Vodafone Idea shares jump 7.5% on global broking firm UBS upgrade

A 'likely' relief on the government dues front for Vodafone Idea (VIL) and expectations of telecom tariff hikes could drive the share prices up by 70-80 per cent, global broking firm UBS said in a report. It has upgraded the stock to buy with a target price (TP) of Rs 18.

"Assuming AGR (adjusted gross revenue) dues are completely waived off, our DCF (discounted cash flow) value could increase to Rs 24 per share, versus Rs 12 when there is no waiver. Our TP of Rs 18 is based on a 50 per cent probability of AGR dues waiver," the report said.

The upgrade led to a sharp jump in stock price. The share rose 7.5 per cent on Friday to close at Rs 15.1 on the NSE.

The brokerage noted that it expects 50-75 per cent of the AGR dues to be cancelled for VIL.

The telco has to pay Rs 12,000 crore to the government between October 2025 and March 2026, taking into account both principal and interest. Subsequently, it needs to pay Rs 43,000 crore annually for five years, or from FY27 till FY31.

"We believe relief in the form of AGR reduction by the Supreme Court or equity conversion, moratoriums by the government is highly likely, especially given the Government's stated objective of ensuring three viable private telcos," UBS said.

The brokerage also reiterated its 'Neutral' stance on Bharti Airtel and Indus Towers, while raising the TPs. It has now set a Rs 1,430 target for Airtel and Rs 355 for Indus Towers.

It noted that the key risk to its views on VIL is the "absence of any relief on AGR/spectrum dues, in which case the capex plans (and consequent market share gains) are unlikely to materialise".

VIL raised Rs 18,000 crore by issuing new shares at Rs 11 apiece in a follow-on public offer (FPO) last month, largely to fund its 5G rollout plans.