Vodafone Idea share price continued its uptrend on Tuesday, with the telecom stock rising over 3 percent to trade at Rs 11.57 on the Bombay Stock Exchange (BSE) after global brokerage Credit Suisse upgraded its target price. In the past five trading sessions, the VI stock price has rallied over 10 percent, hitting a fresh nine-month high of Rs 11.95 on the BSE on Monday after the company increased its prepaid tariff by 20-25 percent with effect from November 25.
On Monday, the stock had risen to the highest level seen since February 21, 2021. It had hit a 52-week high of Rs 13.80 on January 15, 2021. The stock has risen 13 percent in the past month, 32 percent in the last six months, 2 percent so far this year, and over 14 percent over the past year.
At 12:20 am, the stock was down over half a percent to Rs 11.13, having pared earlier gains. In comparison, the benchmark index was up over 0.3 percent. The combined trading volume of NSE and BSE has surged 28 crores Tuesday, having risen to 82 crores on Monday.
Vodafone idea 5-day stock performance (Source: TradingView)Meanwhile, Credit Suisse has raised the target price on the stock from Rs 8 to Rs 7 per share. The brokerage has an underperform call, meaning the shares are expected to do slightly worse than the market returns. It also said the company will need $700-$800 over the next six months to meet its repayment obligations.
Last week, the telco had hiked its prepaid tariff plans by over 22 percent across the board. Its entry-level plans had undergone a 25 percent hike. In an exchange filing, the company had said the new plans will start the improve the average revenue per user (ARPU) and help address its financial stress.
Credit Suisse, however, said the tariff hikes and the relief package by the government will not fundamentally alter its long-term debt issues. And as the cash flows remain constrained, its ability to invest in 5G and fibre will also be limited, thus affecting its long-term growth outlook.
The telecom industry has been battling mounting debt and losses from the past two years on the back of expensive spectrum charges and hefty regulatory dues. One such due was the aggregated gross revenue or the AGR dues. It is a revenue-sharing mechanism between the telecom operators and the government. Telecos are expected to pay a percentage of their AGR to the government.
However, all this while, the definition of AGR dues was contested. While the government wanted to include non-telecom revenue in the AGR, the telecoms objected. Finally, in the relief package announced by the government in September, the authorities removed non-telecom revenue from the definition. And deferred the payments of AGR dues by four years.
However, even after removing some hefty regulatory dues, Vodafone Idea owes Rs 23,400 to various debtors. It is expected to pay Rs 2,600 crore interest to banks. And Rs 6,000 crore for the redemption of non-convertible debentures in December.
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