Vodafone Idea slips over 14% after Goldman Sachs predicts 83% downside

Vodafone Idea share price: Shares of Vodafone Idea Ltd. fell more than 14 per cent on Friday after foreign brokerage firm Goldman Sachs predicted as steep as 83 per cent downside in the stock price. Vodafone Idea shares tumbled 14.44 per cent to hit a low of Rs 12.91 apiece on the BSE after Goldman Sachs decided to retain its 'Sell' rating on the stock and revised its target price upwards to Rs  2.5 from Rs  2.2 earlier.

The brokerage's negative view is despite the recent capital raise by Vodafone Idea, that too according to Goldman Sachs will not be enough to arrest the ongoing market share erosion for the company. Goldman Sachs sees the company's market share fall 300 bps over the next 3-4 years. The firm also estimates that for this, Vodafone Idea would have to raise its ARPU by Rs 200-Rs 270 for it to achieve sustainable free cash flow neutrality.

Goldman Sachs said the large premium of Vodafone Idea to its peers Bharti Airtel and Jio is unwarranted as it has inferior growth prospects, lower margins, and a less good balance sheet than its peers. The brokerage sees free cash flow of Vodafone Idea remaining negative at least until FY31.

On the other hand, Citi has kept its rating on Vodafone Idea at variance with a 'Buy' recommendation and a target price of Rs 22 a share. Citi said its positive view is premised on a likely positive Supreme Court verdict on Vodafone Idea's AGR curative petition, which the firm hopes would cut the company's over Rs 70,000-crore AGR dues considerably.

For Citi, the target price does not bake in any AGR dues cuts but estimates an upside could be on the stock price if the positive ruling adds Rs 4-Rs 5 more a share, translating into over 25 per cent upside over the current market price. The brokerage termed Voda Idea as a 'high-risk-high-return' investment, saying the potential gains would be huge if the legal outcome goes in favour.