Uncertainty over AGR keeps Vodafone Idea stock in check

Our Bureau Chennai | Updated on July 01, 2020 Published on July 01, 2020

A Vodafone store in Bengaluru   -  BL

Q4 performance beats market expectation: Analysts

Shares of Vodafone Idea Ltd (VIL) tumbled in early trade on Wednesday as analysts see AGR uncertainty still hanging over the company. The stock of VIL slipped 3 per cent at ₹10.30 on the BSE, around 11 a.m. on Wednesday.

The company has reported a consolidated net loss of ₹11,643.5 crore for the fourth quarter ended March 31, 2020, compared with a net loss of ₹4,881.9 crore in the same period a year ago. Gross revenue stood at ₹11,754.2 crore (₹11,775 crore). The subscriber base fell to 291 million in the fourth quarter from 304 million in the third quarter.

Foreign investment advisory firm Credit Suisse, which set a target price of ₹14 for the stock, said the company has delivered on the topline. However, long-term viability continues to be under a cloud as the company may find it difficult to service AGR dues if the repayment tenure is short.

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While average revenue per user (ARPU) showed a healthy QoQ growth of 11 per cent led by a price hike in December 2019, revenue grew a mere 6 per cent due to subscriber de-growth of 4 per cent, said Motilal Oswal Financial.

“Despite the beat in Q4-FY20 estimates we see FY21E numbers to have limited upward revision as ARPU growth estimated earlier in 1QFY21 may get tapered trending on the lines of Bharti,” it added.

Keshav Lahoti, Associate Equity Analyst, Angel Broking, said: Vodafone Idea’s ability to continue as a going concern is highly dependent on a positive outcome in the AGR matter before the Supreme Court for the payment in installments. The Supreme Court’s next hearing on the AGR matter is scheduled for the third week of July.

“A favourable Supreme Court ruling, an improvement in ARPU, a reduction in loss of market share and any major investment by a big tech investor will be the key triggers for upside in the stock,” he added.

According to ICICI Securities, Vodafone has reported relatively better-than-expected operating numbers with tad higher ARPU growth. The bottomline, however, continues to bleed with certain one-offs exacerbating the pain.

The company continues to face losses and risk of eventual bankruptcy withthe AGR case final verdict being key for its survival, coupled with capital infusion and industry reforms such as floor tariff and other relief, it added.

Published on July 01, 2020
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