India’s telecom sector is the second largest globally, boasting over 1.19 billion subscribers as of September 2024. With a staggering teledensity of 85.69%, it supports a robust digital economy and contributes approximately ₹3.36 trillion (US$40 billion) in revenue for the fiscal year 2024.
With a market capitalization of Rs 55,620.45 crore, the shares of Vodafone Idea Ltd were trading at Rs 7.98 per share, increasing around 0.50 percent as compared to the previous closing price of Rs 7.94 apiece.
Brokerage recommendation:-
Citi Research, one of the well-known brokerages globally, gave a ‘Buy’ call on the telecom stock with a target price of Rs 13 apiece, indicating a potential upside of 68 percent from Wednesday’s price of Rs 7.63 per share.
Target Rational:-
According to the brokerage, the telecom department has exempted the obligation to submit a bank guarantee for spectrum auctions performed previous to the reform package, claiming that the latest “relief” will stimulate 4G and 5G investments in India.
Furthermore, previous to this reform, VIL was obliged to give bank guarantees totaling around Rs 24,800 crore against each spectrum payment 13 months before the installment was due for the aforementioned auctions, according to a BSE filing.
Additionally, the government’s bank guarantee waiver is a significant relief to Vodafone Idea, which was unable to furnish the guarantees. They also hampered efforts to get loan capital, according to the brokerage.
Financial performance:-
Examine the company’s financial condition, revenue jumped by 10 percent from Rs 10,716 crore in Q2FY24 to Rs 10,932 crore in Q2FY25, and during the same time frame, net loss shrunk from Rs 8,738 crore to Rs 7,176 crore..
Strategic Initiatives:-
The company is making significant capex investments, with ₹13.6 billion spent in Q2FY25 and a projected ₹80 billion for H2FY25. Key initiatives include increasing 4G data capacity by 14%, adding 42,000 4G sites, and enhancing network speeds by 18%, improving coverage and indoor experience.
Market Initiatives:-
Recent tariff hikes boosted ARPU and revenue growth, with customer ARPU ex-M2M rising 7.8% QoQ. Despite losing 5.1 million subscribers due to increased port-outs to a competitor not raising tariffs, the company continued growing its postpaid segment with feature-rich offerings. A merger is underway.
Management comments:-
Management is optimistic about the company’s transformation and its competitive positioning in the market. They are confident in leveraging investments to drive improved performance and growth, particularly in the telecom sector, ensuring a strong future outlook and enhanced market presence.
Company snapshot:-
Vodafone Idea Limited provides pan-India voice and data services across second-generation (2G), third-generation (3G) and fourth-generation (4G) platforms. Its Vodafone Idea business services provide communication solutions to global and Indian corporations, public sector and government bodies, small and medium enterprises, and start-ups.
Written by:- Abhishek Singh
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