Based on the recent capital raised, Goldman Sachs has forecast a further 300 basis points of share loss for Vodafone Idea over the next 3-4 years.
“Vodafone Idea has large AGR/spectrum-related payments starting in FY26; while the government has the option of converting some dues into equity, we estimate ARPUs would have to rise by Rs 200-270 (120%-150% under different scenarios) vs Dec ‘24E levels for Vodafone Idea to be sustainably free cash flow neutral, a low probability in the medium term in our view. Excluding the impact from any such potential conversion, we expect free cash flow to be negative at least until FY31,” Goldman’s Manish Adukia said.
Vodafone Idea recently raised Rs 20,100 crore in equity through a combination of a follow-on public offer and capital infusion from promoters. The company also plans to raise an additional Rs 25,000 crore in debt. However, according to Goldman Sachs, for Vodafone Idea to achieve free cash flow neutrality, its Average Revenue Per User (ARPU) would need to increase to 2.2 to 2.5 times the levels from December 2024 by FY27.
“For Vodafone Idea to be free cash flow (FCF) neutral, we estimate ARPUs would have to increase to 2.2-2.5x from Dec ‘24E levels by FY27E. In our base case, we forecast an annual ARPU increase of about 15%, in line with the recent increase in tariffs, which would imply Vodafone Idea would require 6-7 years of 15% annual tariff increases to be FCF neutral,” the brokerage added.