Vodafone Idea shares price in focus as Jefferies initiates coverage with Buy rating. Why are analysts bullish?

Shares of Vodafone Idea are likely to remain in focus on Thursday after global brokerage Jefferies initiated coverage on the telecom operator with a ‘Buy’ rating and a price target of Rs 20 per share. The target implies a 29% upside from current market levels.

Jefferies sees Vodafone Idea as a high-beta turnaround opportunity, with subscriber stabilisation, operating leverage and tariff-led earnings growth expected to support the recovery. The brokerage forecasts an 11% revenue CAGR over FY26-29 as subscriber trends stabilise, while cash EBITDA is expected to grow at a 25% CAGR over FY26-31.

Why is Jefferies bullish on Vodafone Idea stock?

The brokerage expects network investments to help reduce churn and support gross subscriber additions, potentially leading to a turnaround in subscriber additions from FY28. It also sees room for premiumisation, given Vodafone Idea’s lower share of data subscribers. Jefferies expects revenue to grow at an 11% CAGR over FY26-29, driven by subscriber stabilisation, premiumisation and tariff-led ARPU growth, which it said would help sustain revenue market share.


Jefferies expects operating leverage to drive a significant improvement in Vodafone Idea’s cash EBITDA margin, which it forecasts will expand by 840 basis points to 29% over FY26-29. The brokerage estimates incremental EBITDA margins of around 50% over FY26-29, below the 60%-plus margins seen for telcos because of accelerated network rollouts during this period. It expects incremental EBITDA margins to rise above 60% from FY30 as network rollouts normalise.

The improvement in cash EBITDA is expected to help Vodafone Idea deliver a 25% CAGR in cash EBITDA over FY26-31 and sharply improve its return on invested capital, which Jefferies expects to move from negative territory currently to double digits by FY32.

Vodafone Idea most leveraged beneficiary of tariff hike

Jefferies also considers Vodafone Idea the most leveraged beneficiary of tariff hikes. According to the brokerage, every 10% increase in tariffs could potentially translate into around 34% upside in equity value. Its Rs 20 price target is based on a valuation of 23x EV/Cash EBITDA, in line with Vodafone Idea’s five-year average.

However, Jefferies’ investment thesis depends on future tariff hikes and Vodafone Idea securing additional funding, including a required Rs 16,000 crore equity raise by FY30.

The brokerage expects Vodafone Idea’s cash outflows to rise sharply to more than Rs 40,000 crore annually during FY29-34, resulting in a temporary cash flow mismatch over the period. While the company’s planned Rs 25,000 crore debt raise is expected to be sufficient to tide over FY27-29, Jefferies estimates that Vodafone Idea will need a fresh Rs 16,000 crore equity infusion in FY30.

The equity infusion would also trigger the conversion of spectrum liabilities worth Rs 15,300 crore into equity by the government, according to the report. Jefferies said the proposed funding would be sufficient to cover the cash flow shortfall during FY30-34.

“Given that VIL has raised equity of Rs 44,700 crore since 2019, we believe raising another Rs 16,000 crore equity amidst improving operating cash flows and continued government support may not be difficult,” Jefferies said.

While the brokerage flagged execution and funding risks to its turnaround thesis, it said the required equity raise may not be difficult given Vodafone Idea’s improving operating cash flows and continued government support.

This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here