Shares of this leading telecom stock plunged around 15 percent after Goldman Sachs forecasted an 83.5 percent drop in price, setting a target of Rs.2.5 per share from Thursday’s closing level.
Share Price Movement
On Friday, Vodafone Idea Limited’s share price fell 14.5 percent to an intraday low of Rs.12.91 per share from its previous close of Rs.15.09 apiece. The price has since recovered and is now trading at Rs.13.33 per share.
Reasons for the Decline
Goldman Sachs, a global brokerage firm, has issued a ‘sell’ recommendation for telecom service provider Vodafone Idea Ltd., setting a price target of Rs2.5 per share. This target suggests a potential decline of more than 80 percent from the stock’s closing price on Thursday.
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Goldman Sachs believes that the recent capital raise may not be sufficient to halt Vodafone Idea Ltd.’s loss of market share. Additionally, the company faces significant adjusted gross revenue (AGR) and spectrum-related payments, which are projected to start in FY26.
To achieve sustainable free cash flow neutrality, Vodafone Idea would need to increase its average revenue per user (ARPU) by Rs.200-270 from the levels observed in December 2024. Goldman Sachs predicts that the company’s free cash flow will remain negative at least until FY31.
Moreover, the brokerage also sees limited reasons for Vodafone Idea’s substantial premium to Bharti Airtel and Jio, given its weaker growth, margin returns, and balance sheet profile versus peers, according to the report.
The foreign brokerage forecasts a further decline of 300 basis points in market share over the next 3-4 years.
Financial Performance
In its latest financial update, Vodafone Idea reported net sales of Rs.10,508 crore for Q1 FY25, a 1.4 percent decrease from Rs.10,656 crore in the same quarter last year.
The company’s net losses for the quarter were Rs.6,432 crore, down from Rs.7,840 crore in Q1 FY24. However, the overall financial performance remains weak, reflecting continued financial struggles.
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Company Overview
Vodafone Idea, known as Vi, is an Indian telecommunications company created by the merger of Vodafone India and Idea Cellular in August 2018. Headquartered in Mumbai and Gandhinagar, Vi is the third-largest mobile operator in India, with approximately 219 million subscribers as of April 2024.
Written by – Siddesh S Raskar
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