Citi Turns Bullish on Vodafone Idea with a Buy Call, Declaring the AGR Overhang Finally Resolved!

The recent resolution of the Adjusted Gross Revenue (AGR) saga has marked a significant turning point for Vodafone Idea, as highlighted in Citi’s latest report. With the government acquiring a 36% stake in the company, the effective haircut on AGR dues is now estimated to be 20% lower than the Reserve Bank of India’s projected recovery value. This has notably removed one of the major roadblocks that has stymied lender confidence and delayed the company’s capital-raising efforts, thereby improving Vodafone Idea’s prospects for securing the necessary funding for its network expansion.

Citi has upgraded Vodafone Idea to a “Buy-High Risk” rating and set a target price of Rs 14, signifying an upside potential of over 37%. The brokerage indicates that with the AGR uncertainty now largely resolved, Vodafone Idea is well-positioned to meet its revised debt target of Rs 25,000 crore—a notable increase from the previously estimated Rs 20,000 crore. This positive shift in the firm’s financing outlook is expected to alleviate execution risks and enhance its capacity to successfully roll out its network, thus benefitting both minority shareholders and prospective lenders.

Despite these optimistic developments, Citi has underscored that Vodafone Idea remains a high-risk investment. Several key downside risks continue to loom, including the potential for lower-than-expected tariff hikes, increased subscriber churn, and delays in funding closure. Furthermore, the company faces significant competition from larger rivals like Bharti Airtel and Reliance Jio, who have been rapidly expanding their market share. Hence, while the AGR resolution serves as a crucial inflection point, Vodafone Idea must effectively translate this policy relief into tangible funding and expedited network deployment to turn the tide in its favor.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)