Vi stock hits fresh 1-year low as brokerage sees delay in tariff hike till 2024 polls

On BSE, Vodafone Idea’s stock closed at ₹6.04 apiece, nosediving by 3.67%. During the day, the stock hit a fresh 52-week low of ₹6 apiece.

Currently, Vodafone Idea is down by over 91% from its 52-week high of ₹11.55 apiece on BSE.

Last week, on Friday, Vodafone Idea stock stood at ₹6.27 apiece.

In its latest research note dated March 27th, analysts at Kotak said, Reliance Jio’s renewed aggression in postpaid and Bharti  Airtel matching R-Jio’s unlimited data offering on 5G raises the competitive intensity to attract premium subscribers.

Further, the brokerage’s note highlighted that RJio’s new family postpaid plans effectively caps the customer outgo at ~Rs205-235/month and would likely delay the prospects of a tariff hike and 5G monetization until after the 2024 general elections.

It added, “We now build in 20% smartphone tariff hikes from June 2024 (versus September 2023 earlier).”

That being said, the note added that “a delayed tariff hike while negative for the sector, would hurt Vi’s survival hopes the most, and could effectively lead to a duopoly, likely resulting in accelerated market share gains for Bharti and R-Jio.”

According to Kotak’s note, Vi is the worst impacted by delays in tariff hikes with its FY2024E cash EBITDA declining to ~Rs63 billion (from the current Rs80 billion annual run-rate).

Without expedited fundraising, the brokerage does not expect Vi’s capex to inch up meaningfully to bridge the gap on 4G coverage or roll out 5G, which would result in further market share erosion.

Hence, Kotak’s note said, “according to our estimates, Vi stares at a cash shortfall of ~Rs55 billion over the next 12 months and a delay in tariff hike/fund-raise; this could lead to Vi shutting shop and accelerated market share gains for R-Jio and Bharti, in our view.”

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