Vodafone Idea’s stock saw a 4% surge on Wednesday following its protest against a Goods and Services Tax (GST) demand order. The telecom giant’s share price rose 3.96% to ₹8.39 on the Bombay Stock Exchange (BSE), driven by investor reaction to the company’s legal challenge against the tax ruling.
The company also reported a reduced net loss in Q3 FY25, alongside an increase in revenue and Average Revenue Per User (ARPU). However, analysts remain skeptical about its long-term sustainability, citing subscriber attrition and financial constraints.
Key Highlights:
Vodafone Idea Challenges GST Demand Order:
On February 18, 2025, Vodafone Idea received an order under the Central Goods and Services Tax (CGST) Act, 2017, requiring the company to pay interest and a penalty related to its alleged overuse of Input Tax Credit in the financial year 2020-21.
Details of the GST Order:
- The ruling was issued under Section 73 of the CGST Act.
- It confirms a penalty of ₹97,16,875, in addition to tax and interest.
- Vodafone Idea has denied the allegations and stated that it will take steps to challenge or reverse the decision.
The stock market responded positively to the company’s stance, resulting in a sharp rise in Vodafone Idea’s share price.
Vodafone Idea’s Q3 FY25 Financial Performance:
Despite the ongoing GST dispute, Vodafone Idea reported a reduction in net losses for Q3 FY25. The company’s financial highlights include:
- Net loss reduced from ₹7,175.9 crore in Q1 FY25 to ₹6,609.3 crore in Q3 FY25.
- Revenue increased 1.7% QoQ to ₹11,117.3 crore from ₹10,932.2 crore in Q2 FY25.
- ARPU grew from ₹166 to ₹173.
- EBITDA rose by 3.6% to ₹4,712.4 crore from ₹4,549.8 crore.
- EBITDA margin improved to 42.4% from 41.6% in the previous quarter.
The growth in ARPU and EBITDA margins indicates a stronger operational performance. However, Vodafone Idea continues to face subscriber losses and market share erosion to competitors.
Analysts Raise Concerns Over Long-Term Sustainability:
Despite the short-term stock surge, analysts remain cautious about Vodafone Idea’s long-term prospects. Brokerage firm Motilal Oswal has expressed concerns over:
- Subscriber Attrition: Vodafone Idea continues to lose customers due to a weak subscriber mix.
- Financial Constraints: The company’s network expansion relies on raising loans, which depends on government support.
- High Repayment Obligations: Vodafone Idea must repay over ₹44,000 crore annually to the Government of India starting in H1 FY26.
Brokerage Downgrades Vodafone Idea to “Sell”:
Due to weaker subscriber and ARPU growth projections, Motilal Oswal has:
- Reduced FY26-27 EBITDA estimates for Vodafone Idea by 7-8%.
- Lowered its target price for the stock to ₹5 per share.
- Downgraded Vodafone Idea’s rating from “Neutral” to “Sell”.
While Vodafone Idea’s stock surged following its challenge against the GST demand, long-term concerns persist. The company reported improved financials in Q3 FY25, but sustainability issues, subscriber losses, and financial liabilities pose significant risks. Analysts warn that Vodafone Idea’s future growth depends on stabilizing its customer base and securing additional government support. Investors will closely monitor the company’s response to regulatory challenges and financial restructuring plans in the coming months.
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