Vodafone Idea Revival Hopes? Motilal Oswal Unlocks Key Success Factors & Price Target!

Motilal Oswal has maintained its 'neutral' rating on Vodafone Idea Ltd. (VIL) shares, setting a revised price target of ₹9.5, down from ₹10. The brokerage acknowledges limited downside risk but emphasizes that several conditions must be met for the company's revival.

Vodafone Idea's capital expenditure (capex) has moderated, with an estimated ₹8,000 crore for the full financial year, funded by internal accruals. However, an external fund raise is critical to meet its previously stated capex guidance of ₹50,000-₹55,000 crore over the next three years.

The company continued to lose market share, with revenue and subscriber market share declining by approximately 20 basis points sequentially to its private competitors. The recent Supreme Court judgment on Adjusted Gross Revenue (AGR) dues is seen as a positive, potentially enabling the company's long-pending debt fund raise. Motilal Oswal anticipates a 50% waiver on AGR dues and expects favourable payment terms for both AGR and spectrum dues to be crucial.

A sustained revival also hinges on tariff hikes and a reduction in competitive intensity for customer acquisition. The latter, however, is partially outside the company's control, as increased competitiveness could arise if VIL aggressively pursues subscribers.

Despite these challenges, Motilal Oswal has modestly increased its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimates for FY2026-2028 by 2-6%, primarily due to cost efficiencies. The brokerage believes the government's support for VIL's long-term survival limits the downside risk.

In its most recent quarter, Vodafone Idea narrowed its losses to the lowest in 19 quarters, and its Average Revenue Per User (ARPU) improved to ₹167, though still trailing peers like Reliance Jio and Bharti Airtel. The stock closed 7.3% higher on Tuesday at ₹10.19, approximately 8% below its Future Public Offering (FPO) price.

Impact This news provides insights into the operational and financial outlook of a major telecom player, influencing investor sentiment towards the sector and the specific stock. It can affect trading decisions for those invested in or considering Vodafone Idea.

Impact Rating: 5/10

Difficult Terms: Adjusted Gross Revenue (AGR) Dues: A statutory charge that telecom operators in India pay to the government based on their revenue. The definition and calculation of AGR have been a subject of dispute. Capital Expenditure (Capex): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, technology, or equipment. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA): A measure of a company's operating performance and profitability before accounting for interest, taxes, depreciation, and amortization expenses. Average Revenue Per User (ARPU): A key metric in the telecom industry representing the average monthly revenue generated from a single subscriber. Future Public Offering (FPO): A secondary offering where a company that has already issued stock to the public offers additional shares. This is done to raise more capital.