Vodafone Idea stock: Citi shares its bull case target price, cites 3 key events to watch  

Citi has upgraded Vodafone Idea Ltd shares to 'Buy' from 'Neutral' and raised its target price on the stock by 53 per cent to Rs 23 from Rs 15 earlier.  The foreign brokerage said a discernible shift in stance by market leader Reliance Jio towards monetisation, ease in competitive intensity and the recent tariff hikes that have been at the higher end of consensus estimates are all positives. Moves by Reliance Jio & Bharti to monetise 5G are a clear positive, it added.

"Three key events to monitor in coming months: 1) Completion of VI’s debt raise from banks; 2) Potential further equity infusion into VI (towards part-clearing Indus’s dues); 3) Progress on the AGR case (positive developments could lead to a bull case target price of Rs 28)," Citi said.

The brokerage has raised its FY25-28E Ebitda by 3-7 per cent on the back of 2-6 per cent higher average revenue per user (ARPU). It also increased its target EV/Ebitda multiple by one notch to 12 times -- consistent with the recent change to our multiple for Bharti, driven by improved industry dynamics.

"We retain our High Risk rating as further gov’t support on the liability front remains imperative. Our TP in a bull case could rise to Rs28, contingent on a favourable outcome in the AGR case that could result in a marked reduction in VIL's dues. Indus Towers & VIL offer more triggers in the shorter term within the sector," it said.

Going ahead, investors will now be focus on completion of VIL's debt raise as discussions with banks are already ongoing. A potential equity infusion into Vodafone Idea (up to Rs 2,000 crore ballpark) once the balance 3 per cent stake (out of 21 per cent previously held) in Indus Towers is sold by its UK promoter will be keenly watched, as Citi believes it can be used by Vodafone Idea to partly clear its past dues to Indus Towers.

The progress on the AGR case will also be watched. The Supreme Court is yet to conduct a hearing of the curative petition filed in October 2023, Citi said.