Posted on April 15, 2025, by Niftynews
Vodafone Idea shares may have finally caught the eye of global investors. In its latest report, Citi has issued a ‘Buy (High Risk)’ rating on the debt-laden telecom player, with a target price of ₹12—representing a 67% upside from the April 11 closing price of ₹7.18.
The call comes amid a series of strategic and structural changes in the company, including a ₹3,700 crore spectrum dues-to-equity conversion by the Indian government. This conversion has resulted in the government owning 49% of Vodafone Idea, changing the ownership landscape of the company and bringing renewed attention to its long-term potential.
Government Stake Boosts Investor Confidence
The equity conversion not only eases Vodafone Idea’s balance sheet pressure but also signals implicit government support for the company’s survival and turnaround. This has been a major overhang for the stock, and Citi believes that the government’s large stake changes the risk-reward dynamics.
“With the government holding nearly half of the equity, Vodafone Idea’s access to funding and stability could improve,” Citi stated.
Further supporting this shift is ICRA recent upgrade of Vodafone Idea to investment-grade (BBB-), a critical step for the company to raise debt from banks more easily.
ARPU Growth Is Key to Revenue Upside
In its April 9 investor presentation, Vodafone Idea emphasized that ARPU (Average Revenue Per User) remains below potential, even as data consumption has surged.
ARPU hasn’t kept pace with growing usage
Customer willingness to pay higher tariffs already exists- Further price hikes expected to drive future revenue
The company believes there’s significant headroom for ARPU growth and sees tariff hikes and subscriber additions as the twin pillars of its revenue acceleration strategy. Citi echoed this sentiment, stating that pricing improvements are essential for a sustainable turnaround.
₹50,000 Crore Capex Plan for Network Expansion
Vodafone Idea has announced a capital expenditure plan of ₹50,000–55,000 crore over the next three years. This investment will be used to expand 4G coverage, roll out 5G services selectively, and upgrade existing infrastructure.
The telco’s focus areas include:
Increasing ARPU through better user retention
Expanding rural and underserved coverage
Investing in network quality and digital infrastructure
This capex plan is vital, especially in a highly competitive sector dominated by Reliance Jio and Bharti Airtel, both of which have already made significant 5G advancements.
Analyst Sentiment Remains Divided
Despite Citi’s bullish call, sentiment around Vodafone Idea shares remains mixed-to-negative among analysts:
11 analysts out of 21 rate it a ‘Sell’
Only 5 analysts maintain a ‘Buy’
Another 5 have a ‘Hold’ stance
This division stems from Vodafone Idea’s high debt load, execution risk, and uncertainty around timely tariff hikes. However, Emkay Global and a few others are beginning to warm up to the stock, especially with external support and ARPU traction coming into play.
Indus Towers Also in Focus
Citi also expressed positivity around Indus Towers, a key telecom infrastructure partner for Vodafone Idea. Among 24 analysts tracking Indus:
- 13 have a ‘Buy’ rating
- 6 rate it ‘Hold’
- 5 give it a ‘Sell’ call
Indus Towers, which is heavily reliant on Vodafone Idea for tenancy revenue, could indirectly benefit from any improvement in the telco’s financial health.
Conclusion: High Risk, But High Reward?
Citi’s 67% upside call on Vodafone Idea shares is a bold contrarian bet. The stock has long been a laggard in the telecom space, weighed down by debt, competition, and uncertainty around tariff hikes. However, with the government now a key stakeholder, ICRA’s upgrade, and a clear path to ARPU growth, there’s a compelling—if risky—turnaround narrative emerging.
Investors with high risk appetite may find value at current levels, especially as the company attempts to write a new chapter with strategic backing and capital expenditure momentum.
