Vodafone Idea shares fell over 14% to an intraday low of Rs 12.92. The fall in the stock prices came after the broking house Morgan Stanley gave a “ Sell” rating to the stock. However, the brokerage raised the target price to Rs 2.5 per equity share from Rs 2.2.
Morgan Stanley in its research report said that the company’s analysis suggests a direct correlation between capex and revenue market share, and given the brokerage house’s expectations of peers spending at least 50% higher capex vs Vodafone Idea, “we forecast another 300 bps share loss for the company over the next 3-4 years.”
The broking house expects FCF to be negative at least until FY31. “We estimate Vodafone Idea’s net-debt-to-EBITDA will remain elevated at 19x by Mar ‘25 (despite the capital raise and tariff increase), and we continue to expect its balance sheet to remain stretched even after potential government conversion of near-term dues into equity,” said Morgan Stanley in its research report.
Taking a blue-sky scenario, Morgan Stanley assumed 65% lower AGR dues, consistent tariff increases and no near-term government repayments (upside risks). This further converts to a downside of 83% in the brokerage’s base case.
The stock of Vodafone Idea fell 11.7% in the last five days and 11.2% in the last month. It has fallen 4.4% in the past six months and eroded investors’ wealth almost 21% from year-to-date. However, the stock gave a return of 26% in the last year.
The benchmark index, Nifty 50, has fallen 1.6% in the past five days, but it has risen 3.7% in the past month.