Vodafone Idea Ltd (VIL) saw its shares decline by 4% in Friday's trading session following the announcement of its September quarter results. While the company's revenue largely met expectations, its EBITDA performance marginally missed consensus estimates, leading to a divergence in ratings and price targets from leading brokerages.
Q2 Performance Highlights and Brokerage Reactions
JPMorgan noted that VIL's Q2 revenue aligned with its projections, though EBITDA fell slightly short of market consensus. MOFSL also found the results generally in line with its expectations, pointing to a significant surge in capital expenditure driven by accelerated tower additions.
- Revenue Growth: Increased by 2% sequentially.
- EBITDA: Declined by 1% quarter-on-quarter, coming in 2-3% below consensus.
- EBITDA Margin: Fell by 115 basis points to 41.9%, 120 bps below estimates.
- ARPU: Grew by 1% to Rs 178, matching JPMorgan's forecast.
- Subscriber Additions: Net additions reached 13 lakh, exceeding JPMorgan's estimate, largely due to strong machine-to-machine (M2M) additions.
- Capital Expenditure (Capex): Surged 105% quarter-on-quarter to Rs 3,950 crore, broadly in line with expectations.
Brokerage Ratings and Outlook
Several brokerages maintained their positions on Vodafone Idea stock:
- Nomura, UBS, MOFSL: All retained 'Neutral' ratings on the stock.
- Ambit Capital: Issued a 'Buy' rating with a target price of Rs 18.70 per share, suggesting a potential upside of 44%.
- Axis Capital: Maintained a 'Reduce' rating with a target price of Rs 31.21, implying a 5% potential upside.
- JPMorgan: Kept an 'Underweight' rating with a target price of Rs 9, emphasizing the critical need for bank funding.
Debt and Funding Concerns
MOFSL highlighted VIL's substantial financial obligations, with deferred spectrum and AGR dues totaling Rs 1.31 lakh crore and Rs 26,300 crore, respectively. External debt stood at Rs 4,540 crore. Net debt increased by Rs 3,400 crore quarter-on-quarter to Rs 1.57 lakh crore, as cash and cash equivalents declined.
JPMorgan reiterated its concern, stating, "The key issue for the stock remains the absence of bank funding, which is crucial for capex and sustaining share. We remain Underweight." VIL management, however, indicated progress, having raised Rs 10,500 crore through warrants and secured funded and non-funded limits. The company has also placed orders worth Rs 13,200 crore as part of its ambitious Rs 45,000 crore capex target.