Shares of debt-ridden telecom giant Vodafone Idea have plunged 24 per cent over the past two days, falling below the Rs 10 mark to a low of Rs 9.79 on the BSE amid ongoing disappointment regarding the Adjusted Gross Revenue (AGR) case. The Supreme Court has upheld its previous ruling on the AGR demand against telecom companies, which totals Rs 58,000 crore. Including interest, this burden has escalated to Rs 70,320 crore as of the end of FY24.
In light of this situation, market reactions have been mixed. Global brokerage firm Nomura has upgraded Vodafone Idea from "neutral" to "buy," setting a target price of Rs 15. Nomura believes that the worst is now behind the company with the resolution of the AGR issue. They see the recent decline in stock price, coupled with a favourable industry outlook, as a potential buying opportunity, particularly as government support could alleviate Vodafone Idea's funding challenges.
Conversely, another brokerage, UBS, has indicated that Vodafone Idea's fair value per share could range from Rs 12, assuming no relief on the AGR, to Rs 24, should there be full relief or waiver. Currently, the stock is trading slightly below this implied fair value. UBS has also mentioned that they do not dismiss the possibility of an equity conversion or deferral but emphasize that the impact of such measures on net present value (NPV) for equity holders remains uncertain.
Sushil Choksey of Indus Equity Advisors stated that Vodafone Idea will likely need to engage in some form of fundraising, potentially from shareholders, to strengthen its balance sheet and address the AGR dues unless the government extends the deadline. He expressed confidence that the government intends to support all three major telecom companies—Jio, Airtel, and Vodafone Idea—to maintain competition in the market, particularly for Vodafone.
Choksey expects a positive outcome for shareholders in the long run, even if short-term effects are unfavorable. As of around 11:30 am, Vodafone Idea shares were trading at Rs 10.41 on the BSE.