Down 45% in 1 year! Vodafone Idea shares gain as Citi upgrades to buy, sees 67% potential upside

Shares of Vodafone Idea advanced nearly 4 percent during early trade on Monday, April 15, after global brokerage Citi Research reaffirmed its bullish stance on the embattled telecom operator. The brokerage maintained its 'buy' rating on the stock, along with a target price of ₹12, implying an upside potential of nearly 67 percent from the previous session's close.

In its latest note, Citi said it continues to view Vodafone Idea (Vi) as a “high-risk buy,” but remains optimistic about the company’s prospects, especially in light of the recent equity conversion by the government. The telecom major recently announced that the government has converted spectrum dues worth ₹3,700 crore into equity, boosting the government’s shareholding in the company from 22.6 percent to 48.99 percent.

Despite the government now holding nearly half the company, Vodafone Idea clarified that operational control will remain with the promoters. The equity conversion is seen as a key milestone for the telecom player, which has been under severe financial pressure amid intense industry competition and declining user base.

Adding to the positive momentum, credit rating agency ICRA recently upgraded Vodafone Idea’s credit rating to investment grade (BBB-) from BB+. This upgrade applies to the company’s long-term bank facilities and is expected to facilitate its bank debt-raising efforts going forward.

Vodafone Idea has laid out a roadmap to return to growth, including a capital expenditure plan of ₹50,000–55,000 crore over the next three years. In its investor presentation on April 9, the company reiterated that tariff hikes and subscriber additions are essential to drive revenue growth. The telecom firm stressed that ARPU (Average Revenue Per User) growth is critical, especially as user consumption has soared, while tariffs have not kept pace.

The company emphasized that inflationary pressures and increasing consumption trends justify further tariff increases. Vodafone Idea also pointed out that consumers have already demonstrated their ability to absorb higher rates, paving the way for future hikes aimed at improving profitability and enabling sustained investments in infrastructure.

However, analysts warned that the company’s revenue for the March-ended quarter may decline on a sequential basis, largely due to continued subscriber losses. In contrast, key rival Bharti Airtel is expected to post revenue gains, reinforcing the pressure on Vodafone Idea to arrest churn and boost network competitiveness.

Stock Performance

The stock climbed as much as 3.5 percent intraday to ₹7.43 on April 15. Despite the uptick, it remains significantly below its 52-week high of ₹19.15, touched in June 2024—a decline of over 61 percent. The stock had hit its 52-week low of ₹6.60 in November last year.

Over the past 12 months, Vodafone Idea has eroded nearly 45 percent of investor wealth. However, April has seen a modest recovery, with the scrip gaining 7.5 percent so far after two consecutive months of losses. It declined 10 percent in March and 16.5 percent in February, although January had seen a 14 percent rally.

Citi’s reaffirmation of a 'buy' rating and the ICRA credit rating upgrade appear to have buoyed investor sentiment around Vodafone Idea, offering some relief to a stock battered by prolonged operational and financial struggles. While risks remain, especially around subscriber retention and revenue recovery, the recent developments including equity conversion, proposed capex, and tariff plans indicate a roadmap for revival. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.