Shares of Vodafone Idea (Vi) surged on April 1 as investors reacted to the Indian government’s move to convert the telco’s massive spectrum dues into equity. With this, the government is set to become the largest shareholder in the struggling telecom firm.
On the NSE, Vi’s stock jumped 20.15% to close at ₹8.17 after hitting an intraday high of ₹8.56. It ended 18.94% higher on the BSE at ₹8.10.
As disclosed by Vodafone Idea on March 30, the government will increase its stake from 22.60% to 48.99% by acquiring equity shares worth ₹36,950 crore. These shares are being issued against Vi’s outstanding dues from previous spectrum auctions.
The company has been directed to issue 3,695 crore equity shares at ₹10 each within 30 days. Despite the big jump in stake, the promoters—Vodafone Group and Aditya Birla Group—will continue to retain operational control of the company, at least for now.
According to global brokerage Citi, it is reported that this move could offer some breathing space to Vi, particularly with its cash flow. Citi has maintained a Buy rating on the stock, setting a target price of ₹12. It believes the reduced payout burden over the next three years could help the company wrap up its long-awaited bank debt fundraising.
However, not everyone is convinced.
Brokerage Macquarie has reportedly given the stock a Neutral rating, pegging the target price at ₹7. It noted that Vi’s underlying business still struggles to generate enough free cash flow to meet its obligations. The firm also warned that there remains a high risk of further equity dilution, especially for minority shareholders.
According to Macquarie, if the government were to eventually convert all of Vi’s dues into equity, its shareholding could rise to as much as 81%—making it a de facto government-owned telco.
With the government now stepping in more assertively, analysts say this could potentially reduce Vodafone Idea’s government-related payouts by ₹40,000 crore to ₹75,000 crore over FY26 to FY28. But the company’s financial stress is far from over.
Regulatory payments still loom large, with dues of ₹18,600 crore in FY26, ₹23,600 crore in FY27, and a whopping ₹33,100 crore in FY28.
There are also concerns that even with government help, Vi may continue to bleed market share to rivals like Jio and Bharti Airtel. According to IIFL Securities, Airtel and Hexacom remain the top picks in the sector, while Vi is still seen as the weakest player among the three.
Among 21 analysts tracking Vodafone Idea, 11 have a 'Sell' rating, while five each have a 'Buy' and 'Hold' call. The mood remains cautious, if not outright sceptical.
Indus Towers, which relies heavily on Vi for business, also saw its shares rise 6.2% to ₹355. Out of 24 analysts covering Indus Towers, 13 rate it a 'Buy', six say 'Hold', and five have a 'Sell' rating.
Following the announcement, Vi’s stock hit its upper circuit limit of 10% at ₹7.48 during trading. The rally, however, may not necessarily reflect long-term optimism.
Much of it appears driven by short-term buzz around the government stepping in once again.
