Vodafone Idea shares are a buy or sell? Nomura highlights key triggers and risks

Detailed summary

Nomura identified a successful debt and capital raise, industry-wide tariff hikes, faster subscriber additions and a potential strategic equity investment as key catalysts for Vodafone Idea. Such an investment could provide the company with much-needed capital and improve investor confidence.

Shares of Vodafone Idea Ltd. were trading around 2% lower on Friday, November 13, after the telecom operator reported a mixed set of Q2FY27 results, with revenue largely in line with expectations but operating margins coming under pressure.

Revenue for the quarter stood at ₹11,880 crore, up 1.7% sequentially and 6.2% year-on-year, coming in around 1.4% ahead of the brokerage's estimates.

EBITDA, however, declined 1.1% sequentially, although it increased 6.3% year-on-year to ₹4,980 crore. The figure was 1.6% below Nomura's estimates. EBITDA margin contracted 120 basis points sequentially to 41.9%, marking the steepest quarter-on-quarter decline in four years, according to the brokerage.

EBITDA excluding the impact of Ind AS 116 stood at ₹2,500 crore, up 0.9% sequentially and 11.2% year-on-year.

Average Revenue Per User (ARPU) increased marginally to ₹178 from ₹177 in the previous quarter, but remained below Nomura's estimate of ₹180.90. At 0.6%, Vodafone Idea's sequential ARPU growth was also the slowest among its industry peers.

Vodafone Idea reported revenue of ₹11,884 crore for the September quarter, compared with ₹11,689 crore in the year-ago period, marking growth of around 2% year-on-year. Revenue was broadly in line with expectations.

The company's adjusted loss stood at ₹5,513 crore, marginally lower than the loss of ₹5,521 crore reported in the corresponding quarter last year.

EBITDA margin declined to 41.9% from 43.1% in the year-ago quarter. The company attributed the moderation in margins to annual employee increments and higher marketing expenses.

The company's fundraising plans will also remain an important monitorable, given the need to strengthen its financial position and accelerate network investments.

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