Vodafone Idea’s stock has captured the attention of investors recently, witnessing a remarkable 19% surge since Friday’s closing price. This significant jump in share value comes on the heels of the Indian government’s decision to convert the telecom company’s impending spectrum dues into equity. While this development alleviates some immediate cash flow concerns for Vodafone Idea, the question lingers: is the cloud of uncertainty finally lifting? Leading global brokerage firms have responded by upgrading their ratings for Vodafone Idea and adjusting their target prices upward.

CLSA Upgrades Vodafone Idea to Outperform

In a significant move, CLSA has elevated Vodafone Idea’s rating from Underperform to Outperform, increasing the target price from ₹6 to ₹10 per share. Following the equity conversion, the brokerage estimates Vodafone Idea’s total spectrum debt at approximately $18 billion and AGR dues at around $8 billion. CLSA anticipates that the telecom giant’s cash flow will adequately support capital expenditures after recent tariff hikes.

• The conversion of spectrum dues to equity alleviates repayment pressures.
• CLSA believes the Indian telecom market will remain dominated by three private players.
• The firm has adjusted its valuation expectations, projecting a 10x EV/EBITDA ratio for Vodafone Idea.

Furthermore, CLSA noted an impressive 57% increase in the Average Revenue Per User (ARPU), rising to ₹183 from ₹117 in Q1 FY22. Despite a loss of 56 million subscribers, bringing the total to 200 million, the company’s bank debt stands at a manageable $0.26 billion. This positions Vodafone Idea to invest ₹10,000 crore annually in enhancing its 4G networks and rolling out 5G services.

Nomura Maintains Buy Rating on Vodafone Idea

Nomura has expressed optimism regarding the recent equity conversion, labeling it a “much-awaited positive development.” The brokerage believes that this conversion not only boosts visibility for FY26 but also paves the way for a potential debt raise. While the outlook has improved, Nomura emphasizes that Vodafone Idea must expedite its debt raising efforts to fund network investments and initiate a rebound in subscriber growth.

• Nomura maintains a Buy rating for Vodafone Idea, projecting a 50% increase in the share price over the next year.
• Their target price remains set at ₹10 per share.

In summary, Vodafone Idea is experiencing a crucial turning point. With backing from significant financial adjustments and upgrades from brokers like CLSA and Nomura, the telecom company appears to be on a path to recovery. Investors will be watching closely as the company navigates its next steps in the competitive Indian telecommunications landscape.