Vodafone Idea stock may more-than-half amid subscriber churn: CLSA

Shares of Vodafone Idea could drop as much as 61 per cent to Rs 5, warns analysts at CLSA, if the beleaguered telecom company continues to see subscriber churn.

The company has already seen loss of 17 million wireless subscribers over the past one year, of which 1 million were lost in the month of January 2024 alone. By comparison, Reliance Jio added about 4.2 million wireless subscribers in January 2024, while Bharti Airtel added 0.75 million subscribers, according to the latest data released by the Telecom Regulatory Authority of India (Trai).

With this, the total mobile subsribers at Jio stands at about 464 million and Airtel at 382 million. Vodafone's subscribers, however, stand at 221 million.

The dire situation as led the brokerage to maintain its 'sell' call on the stock with a target price of Rs 5 per share. This would be the fifth-lowest target price for the telecom company, with the least been Rs 1.5 apiece given by Deutsche Bank, as per reports. 

Goldman Sachs has a target price of Rs 2.2 per share, while JP Morgan and HSBC Research have a price target of Rs 3 apiece and Rs 5 per share, respectively.

Of the 17 brokerages covering the stock,14 have 'sell' calls and three have 'hold'.

"Beyond the planned capital expenditure and 5G rollout, Vi faces a financial crunch in FY26CL. Annual spectrum and AGR payments of $4 billion per annum will fall due, unless the government converts debt principal to equity at the end of the moratorium," CLSA said in its latest report.

Besides, a continued delay to its 5G rollout could trigger further subscriber share consolidation, as Reliance Jio and Bharti Airtel Ltd. continue to rapidly ramp up 5G, it added.

At 3:02 PM, shares of the company were off lows, down 0.6 per cent, as against 0.5 per cent rise in the benchmark S&P BSE Sensex. 

The recovery came on the back of a report that Vodafone Idea (Vi) was preparing to launch a follow-on public offer (FPO) to raise Rs 18,000-20,000 crore by the middle of next week.

"Vodafone Idea has reportedly secured commitments from anchor investors, including both foreign and domestic institutional investors, signaling initial support for the FPO. The fundraise has the backing of the Government of India, the largest shareholder in the company at 33 per cent. Some investors have also approached the government before committing to invest in the FPO," the report said. READ MORE

Meanwhile, on April 5, the board of Vodafone Idea sanctioned the allocation of shares valued at Rs 2,075 crore to Oriana Investments Pte Ltd, a subsidiary of the Aditya Birla Group and a member of the promoter consortium, through a preferential allotment.

The issue price stands at Rs 14.87, surpassing the closing price of Rs 13.36 on the BSE last Friday.

Q4FY24 preview

For the March quarter, analysts at Motilal Oswal Financial Services expect VIL to post ~1 per cent quarter-on-quarter (Q-o-Q) Ebitda growth at Rs 4,200 crore, led by an increase in ARPU, even after losing its market share with margin expansions of 30bp Q-o-Q to 41.1 per cent.

Those at Kotak Institutional Equities, meanwhile, expect a 1 per cent Q-o-Q decline in revenue to Rs 10,574 crore as continued subs decline would offset a marginal sequential ARPU uptick. Reported Ebitda, it said, will likely remain stable Q-o-Q at Rs 4,334.6 crore, while reported net loss could stand at Rs 7,642.1 crore vs Rs 6,985.9 crore Q-o-Q and Rs 6,418.9 crore Y-o-Y. 

"We model EoP subscriber base to decline by 4 million Q-o-Q to 211.2 million, and ARPU increase of 0.6 per cent Q-o-Q to Rs146/month as the subscriber mix improvement is offset by 1 lesser day Q-o-Q. Ebitda margin is seen rising by 101 bps Y-o-Y/23 bps Q-o-Q to 41 per cent ," it said.