Vodafone Idea share price rallies 62% in June; should you buy or sell? Analysts warn of volatility

As per the Department of Telecommunications (DoT), the total dues of Vodafone Idea stand at Rs 58,254 crore, of which so far it has paid only Rs 6,854 crore.

Vodafone Idea share price fell nearly 5 per cent to Rs 10.10 apiece on BSE a day after the company reported a net loss of Rs 11,643.5 crore in the January-March quarter of the fiscal ended March 31. Vodafone Idea had posted Rs 4,881.9 crore loss in the corresponding quarter of preceding fiscal. While, for the fiscal ended March 31, the company has reported a net loss of Rs 73,878 crore, the highest ever by any Indian firm. Besides, Vodafone Idea’s subscriber base declined to 291 million in the fourth quarter of the FY20 from 304 million in the previous October-December quarter, according to the TRAI data. Among all the three leading telecom operators, only Vodafone Idea lost subscribers.”With an uncertain outlook, the stock may be highly volatile to media reports on regulatory/judicial outcomes. In such an environment, we place the stock under review until we get clarity on the company’s business continuity,” Motilal Oswal Financial Services said in its latest research report.

Vodafone Idea share price has rallied 62 per cent in the month of June from Rs 6.56 apiece to Rs 10.62. “Vodafone Idea’s ability to continue as a going concern is highly dependent on a positive outcome on AGR matter before the Supreme Court for the payment in instalments. Favourable Supreme Court ruling, improvement in ARPU, reduction in loss of market share and any major investment by a big tech investor will be the key triggers for upside in the stock,” said Keshav Lahoti, Associate Equity Analyst, Angel Broking Ltd.

The Supreme Court has asked Bharti Airtel and Vodafone Idea (VIL) to pay upfront a reasonable amount of adjusted gross revenue (AGR) dues, backed by securities and guarantees, to consider their plea for a staggered payment spread over 20 years. On the revenue front, Vodafone Idea has reported 6 per cent revenue growth at Rs 11,089 crore, on a sequential basis. Company’s EBITDA grew by 28.1 per cent sequentially due to improvement in margins to 37.3 per cent in the quarter ended March 31, as compared to 30.8 per cent in the preceding quarter. “Vodafone Idea’s result was better than street estimates in terms of revenue, ARPU, EBITDA and EBITDA margins,” said Keshav Lahoti.

As per the Department of Telecommunications (DoT), the total dues of Vodafone Idea stand at Rs 58,254 crore, of which so far it has paid only Rs 6,854 crore. “VIL’s fate is dependent on the AGR case resolution, as stated by the management. A positive outcome may provide a lease of life,” said the brokerage firm adding that Vodafone Idea is losing competitive position in the telecom sector.

Last month foreign brokerage CLSA in its report, upgraded the Vodafone Idea stock to buy with a revised target price of Rs 12 on the back of the stock’s favourable risk-reward ratio.

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