Immortal Love Story of Vodafone Idea share and Retailers
Updated: Oct 4, 2021
Will Vodafone Idea become a multi-bagger?
These are a few of the headings I have seen in the past 1 year after reading this articles non of them has given the answer for the same. All article has similar structure who says what and price of the stock.
Let me answer this for you and disclaimer as I have closely looked at it and bought 10K qty at around 2.5 and added 20K qty recently when everyone was panic selling at avg price of 4.7 talking only about my current holdings.
To Understand the whole picture let us understand the whole story in two pictures. Pre JIO era and Post JIO era reason being after the entry of JIO things has completely changed.
Small investors are believing in an idea's turnaround and invested heavily at lower levels even Damani bought Crs of share at around 3₹.
Pre JIO Era:-
As we can see Airtel was the biggest player in India with a market share of 24.8%. Vodafone 19.1% and Idea 17%. If we combine idea and Vodafone users they had more than 1/3rd (36%) of the market pre covid.
Post Jio Era:-
With the increase in the Jio user base, we have seen a sharp decline in other telecom players as Jio was offering 4G services for free.
Aircel and R com business has almost wiped out from the market. Telenor and Tata telco merged with Airtel and Vodafone merged with the idea as they were dying.
After the merger of Vodafone and Idea, each and everyone was talking about Vodafone Idea and many big firms started buying its stock in bulk but unfortunately, things turned out to be extremely different day by day its customer base reduced sharply. Now from 36% to 24% market share and its revenue decrease way faster than one can imagine.
Even we see its market cap, it's only 32K cr but it has to pay 1.8L cr to Department of telecom. Approx 7x to its market cap. Breakdown Spectrum usage 96,270 Cr, Adjusted Gross Revenue in terms of liability is around 60,960 Cr. Even deal with Hutchison has to pay 2.1B$ (approx 15.5K cr).
Few of the analysts believe If the Indian market only 3 telecom companies survived and if the idea dies it will be a duopoly and it will have an adverse effect on consumers. In its solution, they talk about the revenue sharing model instead of license and spectrum fees. Govt has to help in terms of cutting taxes and reducing its debt.
I believe the idea is too big to fall as it has a debt of 1.91L cr that will give a heavy burden on the Indian economy if it will fail. Even currently it has a user base of roughly 27.33 Cr (Overnight no country afford to shut down this much of a sim card). If this kind of big brand and one of the biggest telecom companies dies give a negative signal to Foreign investors if govt does not help before it dies.
If we talk about Stock prices it has fluctuated a lot as most of the investors are retailers and based on psychological study most of them are emotionally attached to the stock and are more sensitive based on news they either have FOMO or fear (panic selling). We have seen stock prices 20% up or down based on news. It has touched 4.55 recently and now again back to 12.
Most important part what's my take on this as news most of the people might be aware of a few of the points I like to mention most of the analysts avoid while talking about Vodafone idea.
I don't see internal issues or faults of promoters or companies if this thing happens any company could die. Strong management lots of innovation and a big brand name attached to it.
Only 3 players are in the market still having 1/4th portion of Indian telecom users. If you see some of the startups raising funds near to 1L cr still don't have much user base no proper revenue or business model. If this startup can raise fund possibilities are very high idea too can raise funds maybe they are waiting for govt help after that they go for fundraising so they have some bargaining power.
Extremely capital intensive market if one wants to acquire user base same network etc has to spend more than 3.5L cr. If any company want to enter India can help Voda Idea and give 1L cr that will help it to turn around completely.
Can expand in other fields related to telecom and can generate handsome revenue.
I see extremely optimistic and competitive new CEO Ravinder Takkar. New campaigning re-branding etc will pay of very soon.
Airtel to helping Vodafone idea in survival if idea dies airtel will have big losses in its subsidiary Indus tower and if Vodafone idea will die airtel won't be able to beat Jio alone. Now airtel is even beating Jio in a few quarters.
NPA bank restructuring might help Vodafone idea to reduce debt.
As I do believe 1.91L cr is an extremely big amount but if you look closer this is positive as well if it fails economy will have a negative impact.
Revenue of 42,126 Cr if they increase tariff by 30% they will have an additional revenue of 12.6K cr. It's a very big figure this amount can help a lot to the company.
Lots of interest from small investors can help a lot of companies in fundraising.
Apart from 2 negative issues, 1. Lots of debt and 2. Decreasing User base I see more than 10 plus points that can go in favour of the company.
For me, Investment at this level is worth it. If it will turn around you will have more than 30x return in 15 Years. 30x might be looking impossible but extremely possible with high probability.
The Telecom industry in India is expected to grow by 30% CAGR. If it will survive it will have a much stronger image than Jio and airtel combine. Vodafone Group will keep on giving new innovations and advanced tech whenever the need will arise so, R&D spent will be very minimal for the company.
Let's have a look at technical analysis
Idea flat correction in wave 4 is expected towards 0.382 Fibonacci levels 9.75.
Wave 5 than expected towards 14.55 which is 0.618 Fibonacci extension and is also expected to be slow up.
Swing traders with risk appetite can long near 9.75 with 8₹ SL.
Stock is highly volatile, trades in upper lower circuits many times and is risky don't allocate too much capital.
Can't be compared with Yes Bank it was the company's fault no external issue. NPA can be increased no one can see the future which person will pay the loan and which one will default. Not backed by big groups and lots of competition in the banking sector. The banking sector is de growing plus NBFC and online banks are giving tough fights. Compare with telecom extremely capital intensive so, no one can enter the network setup alone cost more than 1L cr in India and increase in the customer base will take decades and telecom is a high growth industry that uses will keep on increasing day by day.
Smart investors invest when the company is in pain not when the company is doing extremely well.
This is not an investment advice disclaimer. Investments in equity shares, debentures, etc., are not obligations of, or guaranteed by Brobillionaire or me, and are subject to investment risks.