Nomura double upgrades Vodafone Idea to buy, says worst now behind as AGR overhang concludes; sees 45% potential gains

Shares of distressed telco major Vodafone Idea are in focus today after the apex court on Thursday declined telcos plea to revisit the calculation of AGR dues. In the aftermath of the SC verdict, the stock took a heavy beating in the previous day's trade and ended nearly 20 per cent lower at Rs 10.38 apiece on the BSE. The stock nosedived to its 52-week low in the previous session.

Vodafone Idea's (VIL) current AGR dues stand at Rs 70,300 crore.

Also read: What led to the biggest fall in VIL shares on Thursday?

What global brokerages make of the move for VIL shares?

Nomura has double upgraded the stock to buy from the earlier neutral call and a target of Rs 15, suggesting nearly 45 per cent potential gains.

The rationale for upgrade as given by the brokerage is that as the AGR overhang now concldes, the worst is behind us. The recent sharp correction with strong industry outlook provides an opportunity to Buy, it added.

Nomura added that the centre's support can materially ease VIL’s funding gap. Also it maintains estimates which factor in a 12 per cent ARPU hike & slowing subscriber loss trends for VIL over FY25-26F and a modest recovery in FY27F, which can have upside risks. Hence, expect its EBITDA to record a 15 per cent CAGR over FY24-FY27F.
Citi also maintained its buy call on Vodafone but reduced target price on the counter to 17 from the earlier 22. This suggests an upside of 64 per cent from the last close. Lower our estimates on the back of a reduction in our target EV/EBITDA multiple from 12x to 11x, t added.

In the bear case, the global brokerage sees VIL to go down to Rs 8, while in the bull case it may scale levels of 20, implying nearly 100 per cent gains.

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