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Emkay Global Financial Services has reiterated its ‘Sell’ rating on Vodafone Idea (VI), setting a target price of ₹6, compared to the current market price of ₹10. The brokerage believes that while the recent Supreme Court decision offers a potential policy window for relief, the company’s debt burden remains a major overhang.“Per media reports, the Supreme Court (SC) has permitted the Centre to reconsider the issue of reassessment for Vodafone Idea’s AGR dues,” Emkay said in a note. “This allows the government (GoI) to grant significant relief on AGR dues to VI. However, only ₹0.76 trillion of VI's total debt of ₹1.96 trillion pertains to AGR liabilities.”AGR Relief Positive but Debt Still OverwhelmingAccording to Emkay, even after excluding AGR dues, Vodafone Idea’s debt of around ₹1.18 trillion—mostly related to spectrum payments—remains extremely high given its current earnings. The brokerage noted that the company’s EBITDA stood at ₹92 billion in FY25, excluding IndAS-116 impact, and called for a “holistic view” from the government on the telco’s solvency.While the SC’s move improves VI’s revival prospects, Emkay remains cautious:“Given high leverage, high valuations, and lack of clarity on GoI stance on spectrum debt, we retain SELL on VI and TP of ₹6,” the report stated.Supreme Court Opens Door for Government InterventionThe Supreme Court has allowed the government to reconsider Vodafone Idea’s AGR liabilities, citing that the issue lies within the Union’s policy domain and affects nearly 200 million consumers. With this, the Centre now has flexibility to create a long-term sustainability plan for the struggling telecom operator.Read More - ‘Nothing More To Be Said’: DKS on Siddaramaiah's 5-Year Tenure RemarkHowever, Emkay noted that the relief appears exclusive to Vodafone Idea, given its unique circumstances, and “there is a low chance of the government reversing the current ₹371 billion AGR dues of Bharti Airtel.”Positive Readthrough for Indus TowersThe brokerage highlighted a positive readthrough for Indus Towers, which trades at a discount to global peers due to uncertainty over Vodafone Idea’s future. “The SC decision allows the government to create a plan for long-term sustainability of the company, thereby increasing chances of survival for VI,” Emkay said.This could help narrow the valuation gap for Indus Towers, one of Vodafone Idea’s key clients.Expensive Valuations, Awaiting Government ActionWhile the 27 October Supreme Court ruling is seen as a step toward a more balanced telecom market, Emkay stressed the need for government clarity on spectrum-related liabilities.“Any policy change toward spectrum costs could benefit other operators,” the brokerage added, “though we await more clarity.”Emkay flagged Vodafone Idea’s valuations as expensive, noting that at 13.8x FY27E EV/EBITDA, the stock looks stretched. “We maintain SELL on the stock, considering high leverage, high valuations, and lack of clarity on government stance on spectrum debt,” it said, pegging the target price at ₹6, based on a 12x multiple to Q2FY28E EBITDA.Disclaimer: The views expressed in this article are purely informational, and Republic Media Network does not vouch for, promote or endorse any opinions stated by any third party. Stock market and Mutual Fund investments are subject to market risks, and readers are advised to seek expert advice before investing in stocks, derivatives and Mutual Funds.
