CLSA has retained an 'underperform' rating on Vodafone Idea and reduced its target price to Rs 9 per share from a previous target of Rs 12.

Share Market Live

NSE

The global brokerage believes that Vodafone Idea’s Adjusted Gross Revenue (AGR) dues of $9 billion recognised versus $3 billion self-assessed is a key regulatory overhang and has likely delayed planned fundraising.

In September 2020, the telecom operator announced fundraising of Rs 25,000 crore, of which equity was expected to be Rs 15,000. The company has been is in talks with potential investors but fund raising appears unlikely before the SC allows review of AGR liabilities, the brokerage noted in a report.

The company is under a huge debt of Rs 117,100 crore and includes Rs 94,200 crore of deferred spectrum debt. The debt also excludes lease liabilities.

Vodafone Idea is headed for the financial crisis in FY23CL when $2 billion in annual deferred spectrum payments, besides AGR, will be due. Ahead of Vodafone Idea’s potential $3 billion annual cash outgo is the inevitable AGR review and tariff hikes or the sector will be headed for a duopoly, CLSA said.

Further, the telecom regulator TRAI started consultation on sector floor tariffs in December 2019 but a decision is still pending.

In 9MFY21, Vodafone Idea had a lower 21 million subscriber loss versus 30 million in 9MFY20 but the market share battle is intense. Bharti Airtel’s 4G additions of 43 million in FY21 exceeded Reliance Jio’s 39 million.

“If there is no floor tariff, VIdea can still lead tariff hikes but likely only post-AGR review. We delay the 10 percent increase to 3QFY22,” CLSA said.

The brokerage cut its FY22/23CL estimates by 2 percent-6 percent.

At 12:45 pm, the shares of Vodafone Idea were trading 0.23 percent lower at Rs 8.53 apiece on the BSE.

Catch all the latest updates from the stock market here.

(Edited by : Ajay Vaishnav)

First Published:May 27, 2021 2:11 PM IST