Vodafone Idea Ltd., a debt-ridden telecom service provider, is set to have the Indian government as its largest shareholder following the conversion of spectrum dues into equity. The government’s stake will increase from 22.6% to approximately 49%. Consequently, Vodafone Idea’s stock witnessed a significant surge of 20% on April 1, 2025.
The conversion will result in shares being issued at Rs 10 each, a 47% premium compared to the company’s previous closing price. This move marks a critical shift, as the government’s increased stake signifies a substantial backing for the telecom giant, which has struggled with debt. Experts view this equity conversion as a positive development, offering substantial cash flow relief over the next three years.
According to Citi analyst Saurabh Handa, the conversion will lower Vodafone Idea’s net debt by around 18%, potentially reducing spectrum dues payable over the fiscal years 2026 to 2028. This could translate to nearly Rs 400 billion in cash flow relief, helping the company secure bank funding. Despite this progress, Vodafone Idea still faces annual AGR dues repayments amounting to Rs 16,500 crore from March 2026 onward.
Financial institutions have varied outlooks on Vodafone Idea's future. Citi maintained a 'Buy' rating with a high-risk outlook, setting a target price of Rs 12. Meanwhile, Macquarie rated it 'Neutral' at Rs 7, and Motilal Oswal raised its target to Rs 6.5. Nomura, however, reduced its target to Rs 10, citing continued challenges in stabilizing the subscriber base.
While the government’s intervention boosts short-term stability, experts caution that Vodafone Idea’s long-term survival depends on securing further relief and regaining subscribers amid stiff competition from financially stronger rivals.
