According to ICICI Securities, Vodafone Idea Limited’s (Vi) cash earnings before interest, tax, depreciation, and amortisation (EBITDA) is estimated to grow at compound annual growth rate (CAGR) of 32 per cent during the financial year 2024-28 (FY24-28).
As per ICICI Securities, this is helped by decent customer additions and average revenue per user (ARPU) growth on the back of two likely rounds of tariff increases. It added that Vi, following its targeted Rs 450 billion fundraise, is likely to deliver around 3.3 per cent and 10 per cent growth in customer additions and ARPU, respectively compounded annually over FY24-28.
ICICI Securities, however, cautioned that Vi will need to give about Rs 220 billion of bank guarantees (BGs) to the government on completion of payment moratorium on regulatory payouts in September 2025, which would again sharply increase the telco’s bank exposure in coming years.
It added that Vi’s ARPU growth is expected to be supported by two rounds of tariff increases, resulting in complete translation of tariff hike into revenue. However, it further added that since Vi has higher capex levels planned over the next three years to catch up with bigger rivals Reliance Jio and Bharti Airtel on 4G deployments, this could significantly cap near-term free cash flow generation. Furthermore, such a scenario implies the company would have to raise additional equity or debt to fund interest expenses.
