'Suited for high-risk investor': VIL at Rs 6.50 or Rs 15? Ambit, Nomura, 2 others share targets

Vodafone Idea Ltd (VIL) jumped 14 per cent in Tuesday's trade after the telecom operator said the government has decided to convert its spectrum dues into equity at Rs 10 per share. Following this, a host of brokerages gave price targets in the wide range of Rs 6.50-15.00, saying while the news is materially positive, VIL has a long way to go to be financially viable.   

Nomura India reiterated its 'Buy' rating on VIL with a revised target price of Rs 10 against Rs 12 earlier. Vodafone Idea remains suited for high-risk investors, said Ambit Capital as it suggested a target of Rs 15 on the stock. 'Sell' VIL stock, said MOFSL as it suggested a target of Rs 6.50 on the scrip.  JM Financial suggested a 'Sell' and a target price of Rs 9 on the stock, as long-term sustainability is still contingent upon significant a favourable government support. 

"We think timely government support is a shot in the arm for VI’s debt fund-raising and capex efforts. The government only converted spectrum dues into equity while leaving AGR untouched. We believe this gives the government scope to consider relief measures w.r.t AGR," Ambit Capital said. 

Nomura called the decision a material positive for VIL, as it eases concerns on VIL managing repayments in FY26 and also improves the outlook for a debt raise. It mentioned that VIL was liable to pay R 61,000 crore in spectrum dues over FY26-28, which has dropped to Rs 20,000 crore over the period.

Ambit Capital said the dues conversion is not a stop-gap solution but is a concrete step that eliminates paid existential concerns for 2.5 years. 

It also negates sub-optimal solutions like extension of moratorium on payments and spectrum surrender. 

"Even now, VI needs over Rs 300/- ARPU against 3QFY25’s Rs 173 to be financially viable. We assume the same in FY30. Quicker rollout of 4G/5G sites should help VI stabilise their subscriber churn, which is essential for survival," Ambit said.

Nomura said its calculations indicate that VIL will need to secure debt funding of Rs 40,000 crore over FY26-27F to manage its dues and capex plans. The operator is in discussions with lenders and was working on securing a debt raise of Rs 25,000 crore, VIL noted.

"We believe the finalising of the equity conversion will likely enable a faster turnaround on securing incremental capital," it said.

JM Financial said VIL would require multiple significant tariff hikes that can boost ARPU to Rs 380 by FY28 to meet the annual Rs 43,000 crore payment obligation to GoI over FY28-31 and internally fund a sharp sustainable jump in capex to Rs 10,000-15,000 p.a. in the long term or 15-20 per cent of revenue to give VIL any chance of holding on to its subscriber market share.

"Further, there is no clarity on VIL's long-pending INR 250bn debt-raise, which is critical for execution of its Rs 50,000-55,000 crore 3-year capex plan to arrest decline in its subscriber market share," JM said.

MOFSL said the equity conversion provides cash flow relief for VIL and is a key medium-term positive development, but stabilisation of its subscriber base, long-pending debt raise, and further relief on AGR dues remain vital for VIL's long-term survival.