Vodafone Idea shares: Why HDFC Securities see up to 33-50% upside in this telecom stock

Vodafone Idea Ltd (VIL), a leading Indian telecom operator, has garnered renewed interest following HDFC Securities. Its latest analysis outlines both opportunities and significant risks for the telecom player. The report highlights that government-backed relief on adjusted gross revenue (AGR) dues and the possibility of new equity infusion mark a crucial turning point for VIL.

According to HDFC Securities, the Department of Investment and Public Asset Management, Government of India, remains the single-largest public shareholder with a 49 per cent stake as of December 2025. Vodafone Group held a 16.07 per cent stake, while the Aditya Birla Group owned 9.5 per cent.

The government has recently frozen AGR liabilities as of December 2025, which is expected to strengthen cash flow visibility for the company. The relief measure will see VIL paying approximately Rs 124 crore per annum during FY26–FY31 and about Rs 100 crore annually from March 2032 to March 2035. A reassessment of licence fee dues is in its final stages.

HDFC Securities notes that Vodafone Idea has undertaken a phased capital expenditure plan, reporting around Rs 9,570 crore capex in FY25 and guiding for Rs 7,500–8,000 crore in FY26. The company plans Rs 50,000–55,000 crore in capex over the next three years. Of this, Rs 6,450 crore was incurred till the third quarter of FY26, with the balance to be funded by a proposed Rs 25,000 crore term debt and internal accruals.

On the operational front, VIL posted consolidated revenue up nearly 2 per cent year-on-year to Rs 11,323 crore in Q3FY26, with Ebitda rising 2.2 per cent year-on-year to Rs 4,817 crore and a margin of 42.6 per cent. Net loss narrowed to Rs 5,286 crore. The subscriber base stood at 192.9 million, down 3.8 million quarter-on-quarter, and monthly churn increased to 4.4 per cent.

The average revenue per user (ARPU) for Q3FY26 was Rs 186, up from Rs 166 in Q3FY25, supported by sector-wide tariff hikes last July. HDFC Securities expects another round of tariff increases in H1FY27, which, combined with network improvement and an expanding subscriber base, could help boost profits.

"We think achieving double-digit revenue growth and increasing Cash EBITDA to 3x could be a challenging task. Factors like the tariff hike on a regular basis, closure of a major part of debt, stable subscribers and continuation of a favourable regulatory regime could help to achieve the targets in the next 3 years," HDFC Securities cautions.

"Investors can buy the stock at current levels and on dips in the band of Rs 8-9 for a fair value of Rs 12 (17.15 times TTM EV/Ebitda) over the next four quarters. Given the highly uncertain and speculative nature of this investment, risk-conscious investors should treat Rs 5.70 as a clear red flag trigger for exit," it added, suggesting a 33-50% upside in the stock.

HDFC Securities adds, "With the Indian government showing signs of potential relief on AGR (Adjusted Gross Revenue) dues and the possibility of fresh capital infusion from new strategic investors, Vodafone Idea stands at a critical inflection point that could fundamentally alter its financial trajectory and long-term viability."

Commenting on the key risks, HDFC Securities said that VIL’s market share has declined from 34 per cent in FY19 to 17 per cent as of September 2025, following subscriber losses post Jio's entry, resulting in weaker revenue generation. While VIL’s ARPU is relatively lower in the industry, it expanded from Rs 164 in FY25 to Rs 186 in Q3FY26, led by plan upgrades and subscriber mix improvement.

Significant delay in debt tie-up is impairing planned growth capex. Completion of capex is critical to arresting churn and expanding ARPU as customers migrate to better platforms.- Continued overhang of high indebtedness related to spectrum and AGR dues, marked by high leverage due to substantial deferred liabilities payable to the Government of India, said the brokerage.