ICICI Direct keeps Vodafone idea share target under review; picks this Tata group share for upside of 30%

Brokerage house ICICI Direct has put target price of Vodafone idea shares under review over balance sheet stress of India’s third largest telecom operator with approximately 24.7 crore wireless customers. Delayed 4G network expansion further puts telecom player behind key listed players and lags 4G network coverage. 

The report also raised concerns over ARPU and margins of Q3FY22 results. "Reported revenues were up 3.3% QoQ to 9,717 crore, as ARPU grew ~5.5% QoQ to 115, led by partial pass through of tariff hike. The subscriber base decline continued at ~8.2 million, with churn rate at 3.4% (vs. 2.9% in Q2). 4G sub base saw addition of merely 0.8 mn QoQ to 117 million. The reported loss stood at Rs 7231 crore," it said.  

Substantial fundraise to meet capital spends to expand 4G network coverage and Improvement in subscriber churn will be crucial in respect to future price performance of Vodafone Idea is concerned, it said. 

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Vodafone Idea shares have corrected over 11 per cent in the last 5 trading sessions and declined 20% in one month on the NSE as on January 27.  

Shares of Vodafone Idea on Monday corrected 5 per cent to Rs 10.65 per share in the early trade on the BSE on Thursday.  At 11.45 am, shares of the telecom company were trading at Rs 10.80, down Rs 0.50 or 4.42% on the BSE.  

What should investors do with Vodafone Idea shares 

Keeping target price 'under review', the brokerage said, "VIL’s share price has declined by nearly 63% over the past three and half years (post-merger). While recent government relief measures ensure survival of VIL, staying competitive will be function of how quickly it raises funds."  

It picked alternate stock from telecom space and suggested to buy Tata Communication for target of Rs 1775 per equity share, which translates into 30 per cent upside from day's low of Rs 1251.55 apiece on the BSE.