Vodafone Idea share price: Jefferies sees 132% upside to ₹36 on tariff hikes; initiates coverage with 'Buy' rating

Global brokerage firm Jefferies has expressed optimism over Vodafone Idea's potential recovery, citing subscriber stabilisation, strong operating leverage, and tariff hikes. The shares have surged more than 70% over the last year, supported by improving financial performance, rising ARPU, and a recovery in the subscriber base. These factors have collectively supported the stock's rally, pushing its market capitalisation back above ₹ 1 lakh crore. Jefferies expects the rally to continue as it initiated coverage on the stock with a 'buy' rating and set a target price of ₹ 20 apiece. In its bull-case scenario, Jefferies expects the stock to reach ₹ 36, indicating an upside of 132%, assuming cumulative tariff hikes of 30% during FY27–29E. However, in its bear-case scenario, the brokerage expects the stock to fall to ₹ 9, assuming no tariff hikes during FY27–29E. Jefferies expects Vodafone Idea's network investments to reduce churn further and support a turnaround in subscriber additions from FY28. The brokerage believes this, along with higher gross subscriber additions and greater scope for premiumisation given VIL's lower share of data subscribers, should improve the company's ability to translate tariff hikes into revenue growth. Jefferies forecasts an 11% revenue CAGR over FY26–29, driven by subscriber stabilisation, premiumisation and tariff-led ARPU growth. The brokerage also expects strong operating leverage to drive a significant improvement in profitability. Jefferies forecasts an 840-basis-point expansion in VIL's cash EBITDA margin to 29% over FY26–29, resulting in a 25% CAGR in cash EBITDA over FY26–31. It expects incremental EBITDA margins to rise above 60% from FY30 as network rollouts normalise. Jefferies expects VIL's operating cash flows to improve steadily but sees a temporary cash-flow mismatch as annual cash outflows rise to more than ₹ 400 billion during FY29–34. The brokerage estimates that the planned ₹ 250 billion debt raise should help fund the company through FY27–29, but VIL would require a further ₹ 160 billion equity infusion in FY30. Despite the funding requirement, Jefferies believes another ₹ 160 billion equity raise may not be difficult given VIL's improving operating cash flows and continued government support. The brokerage views VIL as a high-beta turnaround opportunity, with revenue growth, operating leverage, and tariff hikes driving a potential ROIC improvement from negative territory currently to double digits by FY32. It estimates that every 10% tariff hike could potentially result in around 34% upside in VIL's equity value.