Vodafone Idea had a tough day on Friday. A report from global brokerage firm Goldman Sachs caused the company’s shares to drop nearly 14%. Goldman Sachs reduced its target price for Vodafone Idea’s stock to ₹2.5. As a result, the stock fell to ₹12.92 on the NSE and ₹12.91 on the BSE during Friday’s trading. By 2:30 PM, it had slightly recovered to ₹13.40. The stock had closed at ₹15.09 the previous day.
Goldman Sachs Forecasts Further Drop
Goldman Sachs’ report suggests that Vodafone Idea’s stock could fall to ₹2.5, representing an 83% drop from its current level. The brokerage believes there will be no significant improvement in the stock over the next 3-4 years. Recently, Vodafone Idea raised funds through a Follow-On Public Offer (FPO) and the promoters invested as well, raising ₹20,100 crore. The company is also preparing to take on ₹25,000 crore in debt. During the FPO, Goldman Sachs bought about 8.1 million shares at ₹11 each. This new report from Goldman Sachs has surprised many.
See here also : sahara-case-good-news-for-investors-from-supreme-court-hope-to-get-stuck-money-soon
Low Chances of Positive Free Cash Flow by 2031
Goldman Sachs also mentioned that Vodafone Idea needs to make significant payments related to AGR and spectrum from FY 2026. The government might convert some of its dues into equity. The report estimates a 200-270 rupee increase in ARPU (Average Revenue Per User), which could be a 120-150% rise. However, the report suggests that the chances of Vodafone Idea having positive free cash flow in the medium term are low. Goldman Sachs predicts it is unlikely the company will achieve positive free cash flow by FY 2031. Vodafone Idea would need to increase its ARPU about 2.5 times by FY 2027 to reach a neutral free cash flow position.