Vodafone Idea’s shares jumped almost 10% on New Year’s Day, driven by new government relief and a cash infusion from its parent company. But experts say the upside may be short‑lived.
What sparked the rally?
The Union Cabinet approved a five‑year moratorium on the telecom‑giant’s adjusted gross revenue (AGR) dues, effectively pausing payments of around ₹87,695 crore. At the same time, Vodafone Group agreed to transfer roughly ₹5,836 crore to Vodafone Idea.
Key details of the government package
- A Department of Telecommunications committee will recalculate the AGR dues, possibly removing interest and penalties.
- Payments for FY18‑19 will be spread over the next five years.
- The remaining dues are rescheduled to be paid between FY32 and FY41.
Cash injection from Vodafone Group
- ₹5,836 crore will be paid in installments, with ₹2,307 crore due in the next 12 months.
- Vodafone Group will also transfer its 328 crore shares in Vodafone Idea to the Indian subsidiary.
Analyst outlook – Emkay Research
Emkay Research kept its “Sell” rating, setting a target price of ₹6 per share. That suggests a potential drop of more than 44% from the current level.
Key concerns highlighted by the brokerage:
- Even without AGR dues, the company’s debt‑to‑EBITDA ratio remains high.
- Cash balance stood at ₹30.8 crore at the end of Q2 FY26, while annualized EBITDA is just ₹8.98 billion.
- Capex guidance of ₹75‑80 billion for FY26 could keep leverage elevated.
- Without a clear plan to restructure spectrum debt, the firm’s long‑term sustainability is uncertain.
Bottom line for investors
While the immediate boost from AGR relief and the cash infusion is welcome, the underlying financial stress hasn’t disappeared. Investors should watch for further government actions on spectrum liabilities before betting on a sustained rally.
Disclaimer
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.