Telecos to benefit from likely tariff hikes, says IIFL Securities; upgrades Vodafone Idea, ups target on Bharti Airtel
₹18,000 crore from the primary market, which it intends to use for capacity expansion and payments of debt and other dues. Analysts believe Vodafone Idea FPO will also benefit Indus Towers from the telco’s improved financial position and subsequent rollouts, as well as potential reinstatement of dividend. Also Read: Vodafone Idea FPO opens today: Shares rise; GMP, price, other details. Should you apply? IIFL Securities upgraded its rating on Vodafone Idea shares to ‘Add’ with a target price of ₹14 per share and recommended subscribing to the Vodafone Idea FPO.
The broking firm also upgraded Indus Towers to ‘Buy’ with a target price of ₹379 per share. It believes the equity infusion in Vodafone Idea, which is likely to be followed by debt raising, will result in ₹45,000 crore funding and should enable the telco to narrow the 4G coverage or capacity gap with peers. This would not only arrest sub losses but also enable faster upgrade of 2G users to 4G.
Direct tariff hikes, coupled with this upgrade, is estimated to drive Vodafone Idea’s Average Revenue Per User (ARPU) from ₹145 in Q3FY24 to ₹241 in FY27. Also Read: Vodafone Idea FPO: Shares jump 4% after rise in GMP. Should you apply? Moreover, IIFL Securities said there is a decent chance of a favourable verdict in the AGR curative petition and it assumes 50% liability relief on ₹70,000 crore AGR dues.
Meanwhile, IIFL Securities also believes that tariff hikes are imminent post-elections, driven by the need for improvement in return ratios as Reliance Industries is likely to consider an initial public offering (IPO) of Jio Platforms. “With the government keen on ensuring a three-player market, we do not see the regulator frowning upon tariff hikes. Notwithstanding the weak
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