BofA Securities has upgraded its rating for Vodafone Idea, recognizing the company as a potential beneficiary of tariff adjustments in the telecom sector.
The financial institution believes that Vodafone Idea has the capability to leverage tariff increases in the industry. Even a modest 5% increase in the average revenue per user (ARPU) could significantly boost Vodafone Idea's earnings per share (EPS) by up to 12%.
With the recent capital infusion, Vodafone Idea is expected to strengthen its 4G network coverage, which could help mitigate its market share decline and improve its competitive position in the market.
However, BofA Securities remains cautious and refrains from labeling Vodafone Idea as a Buy until further clarity on its funding position improvement post FY26, as the spectrum moratorium ends.
BofA Securities has adjusted its price targets for Bharti Airtel Ltd and Reliance Industries Ltd, anticipating Indus Towers to benefit indirectly from potential tariff revisions.
For Bharti Airtel, the price target has been increased to Rs 1,430 from Rs 1,300, while for Reliance Industries, the target has been raised to Rs 3,340 from Rs 3,250.
The brokerage firm expects Bharti Airtel and Reliance Industries to utilize improving cash flows to invest in and grow their fibre broadband, enterprise, data center, and digital businesses, diversifying cash flows from the cellular business and adding new growth drivers.
BofA Securities forecasts a 2-4% increase in EPS for fiscal years 2025 and 2026, along with a reduction in the weighted average cost of capital (WACC) to 10.3% from 10.8%.
The price objective for Indus Towers has been revised to Rs 410. Currently, Indus Towers trades at a FY25E Ebitda multiple of 7.2 times, a discount compared to the global average multiple of 12 times.
