Vodafone Idea Ltd's stock plunged over 33 percent in September, marking its sharpest decline since October 2019, with its market capitalization shrinking by more than Rs 34,000 crore during the month. The stock closed at Rs 10.36 per share on September 30, down from Rs 15.64 at the start of the month, reducing its market cap to Rs 72,000 crore from Rs 1.06 lakh crore.
The steep decline followed the Supreme Court's rejection of telecom companies' plea to recalculate their adjusted gross revenue (AGR) dues. Vodafone Idea's curative petition in the AGR case sought three key reliefs: correcting arithmetic and clerical errors in the AGR demand, capping the penalty at 50 percent of the shortfall, and revising the penalty interest rate to 2 percent above the State Bank of India’s prime lending rate.
According to IIFL Securities, Vodafone Idea's cash flow challenges are expected to worsen without court relief. The ruling offers a slight positive for Bharti Airtel, potentially benefiting from market share gains. However, Vodafone Idea's ability to move forward with its debt-raising plans, critical to maintaining its capital expenditure, remains uncertain following the adverse verdict.
On September 6, Goldman Sachs reaffirmed its bearish outlook on Vodafone Idea, citing continued market share erosion despite recent capital raises. The brokerage highlighted the correlation between capital expenditure and market share, projecting a further 300 basis point loss for Vodafone Idea over the next 3-4 years, as competitors are expected to outspend it by at least 50 percent on capex.
In an optimistic scenario—where AGR dues are reduced by 65 percent, tariffs increase steadily, and no near-term government repayments are required—Goldman sees a best-case share price of Rs 19. The Supreme Court had earlier acknowledged Vodafone Idea's challenge to its 2019 ruling on government payments in July.
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