NEW DELHI: The share of Vodafone Idea (Vi) plummeted by as much as 14% on Friday after Goldman Sachs predicted a potential downside of over 80% from the stock’s last closing level. The share price fell to a low of Rs 12.91, down from the previous day’s close of Rs 15.09. Vodafone Idea’s share closed at Rs 13.43, down by 11% from Thursday. The brokerage set a target price of Rs 2.5 per share, triggering a sell-off in Vi stock.
As per Goldman Sachs, the company’s recent capital raise is a positive step but insufficient to prevent market share erosion. Vi recently raised Rs 20,100 crore in equity via a combination of a follow-on public offer and capital infusion from promoters. The company plans to raise an additional Rs 25,000 crore in debt.
“Our analysis suggests a direct correlation between capex and revenue market share. Given our expectation that peers will spend at least 50% more on capex compared to Vodafone Idea, we forecast a further 300 basis points loss in market share for the company over the next 3-4 years,” the report says.
Country’s third-largest telecom service provider Vi is set to face major AGR (adjusted gross revenue) and spectrum-related payments starting in FY26. Though the government has the option to convert some of these dues into equity, Goldman Sachs estimates Vi’s net debt-to-EBITDA ratio will remain high at 19 times by March 2025, even with the recent capital raise and tariff increase. The company’s balance sheet is expected to remain stretched, despite potential government equity conversions.
The brokerage projects that average revenue per user (ARPU) will need to increase by Rs 200-270 (120%-150% under various scenarios) by December 2024. Despite these necessary increases, the firm forecasts that Vi’s net debt-to-EBITDA ratio will stay elevated at 19 times by March 2025, with the company’s balance sheet likely remaining strained, even if the government converts some near-term dues into equity.