The government becomes Vodafone Idea’s largest shareholder with a 49% stake, sending shares soaring. But with debt concerns and execution risks, is the rally sustainable?
April 1, 2025: New Delhi:
Vodafone Idea shares surged nearly 26% on Tuesday to hit ₹8.56 on the NSE, before closing 20% higher at ₹8.17, after the government converted ₹36,950 crore worth of the telecom operator’s dues into equity. This move boosts the government’s stake in the company to 48.99%, making it the largest shareholder.
Also Read: Govt to Raise Stake in Vodafone Idea to 48.99% via Equity Conversion
Under the deal, Vodafone Idea will issue 3,695 crore equity shares at ₹10 each — a 47% premium over the last closing price. Promoter stakes of Vodafone Plc and Aditya Birla Group will drop to 16.1% and 9.4% respectively, though operational control remains unchanged.
Also Read: Vodafone Idea Shares Hit 10% Upper Circuit Amid AGR Waiver Buzz
💬 What Analysts Are Saying
- Citi called the development “materially positive” for cash flow and debt fundraising.
- It set a buy rating with a price target of ₹12, implying a 77% upside.
- However, Motilal Oswal and JM Financial maintained ‘Sell’ ratings, citing unresolved debt issues and unclear tariff hikes.
🔍 Key Risks Highlighted by Brokerages
- VIL needs tariff hikes to boost ARPU from ₹163 to ₹380 by FY28.
- Uncertainty looms over the ₹25,000 crore debt raise.
- A successful ₹500–550 billion capex plan is crucial to halt market share erosion.
📊 Impact on Indus Towers
Citi is bullish on Indus Towers, one of Vodafone Idea’s largest creditors and infrastructure providers. It expects:
- An improved cash flow outlook
- Potential dividend reinstatement
- A 40% upside with a price target of ₹470
“Stabilisation of Vodafone Idea’s finances can help Indus recover past dues and support tenancy growth from upcoming 5G rollout,” Citi noted.
🧠 Should You Buy Vodafone Idea?
While Citi remains optimistic, other brokerages advise caution. The long-term viability of VIL hinges on multiple factors:
- Executing tariff hikes
- Raising fresh debt
- Sustaining user base growth
Until then, the stock remains speculative and high-risk despite the short-term boost.
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