Vodafone Idea surges 9%, hits 2-month high; stock zooms 51% in a month

Shares of Vodafone Idea surged 9 per cent to hit a two-month high of Rs 5.93 on the BSE on Wednesday amid expectations of an increase in tariff rates in the near term.

The telecom services provider’s stock was trading at its highest level since March 18, 2020. It has rallied 51 per cent in the past one month from the level of Rs 3.92, on the back of delivery-based buying. In comparison, the S&P BSE Sensex was down 3.5 per cent during the same period.

At 12:56 pm, Vodafone Idea was up 4 per cent, against 0.88 per cent rise in the benchmark index. The counter has seen huge trading volumes with a combined 474 million equity shares changing hands on the NSE and BSE so far.

Meanwhile, Bharti Airtel’s stock was zoomed 11 per cent and hit record high on Tuesday after it surprised the Street with a better-than-expected performance in the March quarter. Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, in a post-results call indicated tariffs are unsustainably low and highlighted that the average revenue per user (ARPU) in the March quarter for Bharti Airtel at Rs 154 is inadequate. He expected the ARPU to rise to Rs 200 and above.

Analysts at Emkay Global Financial Services expect Vodafone Idea’s ARPU to rise 12 per cent in the March quarter on the back of the tariff hike and total subscriber loss of 8mn. Wireless revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) are projected to rise 9 per cent and 13 per cent sequentially, respectively, due to the above-stated reasons.

The brokerage firm expects Vodafone Idea’s EBITDA margins to expand 205bps quarter on quarter (qoq) basis. Data subscriber addition of 3 million should also support revenue. Data volume is expected to increase meaningfully at 10 per cent, while Minutes on Network should rise marginally at 2 per cent qoq, it said.

Analysts at Axis Capital expect EBITDA margin of 31.2 per cent (+32 bps QoQ) on post IND AS 116 basis. Bottomline to improve qoq from improved revenue and synergy benefit. Management commentary after Q4 results may help better understand further funding plan in view of AGR penalty and its future operational strategy, the brokerage firm said in results preview.