Vi is a ‘high-risk buy’, shares can rally 67% to Rs 12, Citi Research

Beleaguered telecom operator Vodafone Idea saw its shares rally nearly four percent in the early session on April 15, after global brokerage Citi Research maintained its ‘buy’ tag on the firm.

Citi also reiterated its target price of Rs 12 on the stock, which indicates an upside of around 67 percent from the previous session’s closing price. At 11 am, shares of Vodafone Idea were trading at Rs 7.32, higher by two percent on the NSE.

Citi said it remained positive on VI after the government converted spectrum dues worth Rs 3,700 crore into equity, resulting in the government’s stake in the telecom player jumping. The brokerage reaffirmed that Vodafone Idea remains a ‘high-risk’ buy.

Following the conversion of equity shares, the shareholding of the Government of India in Vodafone Idea will increase from 22.6 percent to 48.99 percent. “The promoters will continue to have operational control of the company,” said the firm in a filing with the bourses.

Furthermore, ratings agency ICRA bumped up its credit rating to BBB- for Vodafone Idea’s long-term fund facilities, compared to the BB+ rating earlier.

However, for the quarter ended March, Vodafone Idea’s revenue is expected to decline sequentially as it continues to lose subscribers, even as bigger rival Bharti Airtel remains on the growth track, analysts have said as earnings season gets underway.

Analysts estimate Vodafone Idea’s March revenue to fall between 1 percent and 2 percent but expect the pace of losses to slow as network coverage improves. They expect its 4G subscriber base to continue to grow on the back of network rollout.

“With an improving network coverage, we expect Vodafone Idea’s pace of net subscriber losses to slow down to 3 million in 4Q versus 5.2 million in Q3. We believe that VIL is still some point away from showing positive net adds,” BoFA Securities said in a note. Moneycontrol