The shares of this telecommunications company break its upper circuit of 10 percent and shout up to 15 percent in morning trading session after the Centre considers waiving a substantial portion of AGR dues.
With a market capitalization of Rs 69,908.92 crore, the shares of Vodafone Idea Ltd were trading at Rs 10.03 per share, increasing around 9.98 percent as compared to the previous closing price of Rs 9.12 apiece.
Reason for rise
The shares of the company have seen positive movement after the Centre considers waiving a substantial portion of AGR dues for Vodafone Idea in financial aid.
Moreover, the Department of Telecommunications (DoT) held meetings with telecom operators, including Vodafone Idea (Vi), to address financial strains. A proposed waiver of 50% interest and 100% penalties could provide Rs 1 lakh crore relief, with Vi potentially reducing AGR dues by Rs 52,000 crore.
Brokerage recommendation
Recently, Citi Research, one of the well-known brokerages globally, gave a ‘Buy’ call on the telecom stock with a target price of Rs 13 apiece, indicating a potential upside of 30 percent from Monday’s price of Rs 7.63 per share.
Target Rational
According to the brokerage, the telecom department has exempted the obligation to submit a bank guarantee for spectrum auctions performed previous to the reform package, claiming that the latest “relief” will stimulate 4G and 5G investments in India.
Furthermore, previous to this reform, VIL was obliged to give bank guarantees totaling around Rs 24,800 crore against each spectrum payment 13 months before the installment was due for the aforementioned auctions, according to a BSE filing.
Additionally, the government’s bank guarantee waiver is a significant relief to Vodafone Idea, which was unable to furnish the guarantees. They also hampered efforts to get loan capital, according to the brokerage.
Financial performance
Examine the company’s financial condition, revenue jumped by 10 percent from Rs 10,716 crore in Q2FY24 to Rs 10,932 crore in Q2FY25, and during the same time frame, net loss shrunk from Rs 8,738 crore to Rs 7,176 crore..
Strategic Initiatives
The company is making significant capex investments, with ₹13.6 billion spent in Q2FY25 and a projected ₹80 billion for H2FY25. Key initiatives include increasing 4G data capacity by 14%, adding 42,000 4G sites, and enhancing network speeds by 18%, improving coverage and indoor experience.
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Market Initiatives
Recent tariff hikes boosted ARPU and revenue growth, with customer ARPU ex-M2M rising 7.8% QoQ. Despite losing 5.1 million subscribers due to increased port-outs to a competitor not raising tariffs, the company continued growing its postpaid segment with feature-rich offerings. A merger is underway.
Management comments
Management is optimistic about the company’s transformation and its competitive positioning in the market. They are confident in leveraging investments to drive improved performance and growth, particularly in the telecom sector, ensuring a strong future outlook and enhanced market presence.
Company snapshot
Vodafone Idea Limited provides pan-India voice and data services across second-generation (2G), third-generation (3G) and fourth-generation (4G) platforms. Its Vodafone Idea business services provide communication solutions to global and Indian corporations, public sector and government bodies, small and medium enterprises, and start-ups.
Written by:- Abhishek Singh
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