Vodafone Idea share price target at Rs 6! High leverage limits upside, says Emkay Global

Emkay Global maintained its 'Sell' rating on Vodafone Idea Ltd with an unchanged target price of Rs 6, after the Union Cabinet reportedly approved a relief package related to the company’s adjusted gross revenue (AGR) dues. Emkay said the relief fell short of Street expectations, as no waiver was granted on pending AGR liabilities, while Vodafone Idea’s leverage and funding challenges remained elevated.

According to Emkay, media reports indicated that the Cabinet approved a five-year interest-free moratorium on Vodafone Idea’s Rs 87,700 crore AGR dues pertaining to periods prior to FY18, with repayments deferred to FY32–FY41. AGR dues relating to FY18 and FY19 were to be paid over FY26–FY31 without any change to the existing schedule. 

Contrary to expectations of at least a 50 per cent waiver, no waiver on AGR dues was announced. Emkay added that the Department of Telecommunications would constitute a committee to reassess AGR dues within six to eight months, including a review of frozen dues based on audit reports, which left scope for a potential reduction in the company’s AGR liability.

Emkay noted that, under the earlier payment schedule as of March 2025, Vodafone Idea was required to pay Rs 75,900 crore in six equal annual instalments starting March 2026. The brokerage also highlighted that the DoT had raised an additional AGR demand of Rs 9,450 crore linked to reassessment and reconciliation for FY16–17. The proposed committee would recalculate AGR dues, including a possible reversal of interest and penalties, and could reassess the frozen dues, offering limited incremental relief.

Despite repeated government support measures, Emkay said Vodafone Idea’s financial position remained stressed. The company’s pre-Ind AS 116 annualised Ebitda stood at Rs 898 crore, equivalent to just 6.7 per cent of its spectrum debt, with a cash balance of Rs 3,080 crore as of end-Q2 FY26. Management had guided for capital expenditure of Rs 7,500–8,000 crore in FY26. Emkay pointed out that leverage remained high even after excluding AGR dues, and argued that additional government intervention would be required to address the company’s spectrum liabilities.

Emkay also highlighted that Vodafone Idea continued to carry around Rs 1.2 lakh crore of deferred spectrum payment obligations, with sizeable repayments scheduled between FY26 and FY44. The brokerage said the company’s current Ebitda generation was insufficient to fund both capex requirements and spectrum repayments, implying a need for further funding support or restructuring.

On valuations, Emkay said Vodafone Idea is trading at 13.6 times FY27E EV/Ebitda, which it viewed as expensive given the company’s stretched balance sheet. The brokerage reiterated that while the government appeared focused on keeping the company solvent, deeper structural reforms and spectrum debt relief would be necessary to create a sustainable capital structure.