Goldman Sachs (GS) has released its latest recommendations for the telecom sector, issuing a sell call on Vodafone Idea with a price target of ₹2.5 per share, citing ongoing financial challenges. Additionally, the brokerage firm gave a sell call on Indus Towers, setting a target of ₹350 per share, while recommending a buy call on Reliance Industries (target ₹3,430 per share) and Bharti Airtel (target ₹1,700 per share), reflecting a more optimistic view on these industry leaders.
AGR Ruling and Impact on Vodafone Idea
Following the Supreme Court’s rejection of the curative petition regarding AGR dues, Goldman Sachs expects Vodafone Idea to face larger and more frequent tariff hikes in a bid to bridge its Free Cash Flow (FCF) gap. Without significant government relief, GS analysts predict that Vodafone Idea’s FCF could remain negative until at least FY31. The AGR ruling has increased the probability of necessary tariff hikes for Vodafone Idea as it struggles with mounting liabilities and operational pressures.
Market Share Shift in Favor of Bharti and Jio
The Supreme Court’s ruling may also accelerate market share gains for Bharti Airtel and Reliance Jio, given Vodafone Idea’s ongoing struggles. According to GS, these two players are likely to benefit from Vodafone Idea’s difficulties, potentially solidifying their positions as the leading telecom operators in the country.
Uncertain Future Without Government Intervention
Goldman Sachs noted that while tariff hikes could provide some relief to Vodafone Idea, the absence of government support or a bailout could keep the company in financial trouble. Analysts highlighted that Vodafone Idea’s long-term viability would hinge on how the government addresses the telecom sector’s financial health, particularly for weaker players like Vodafone Idea.
In contrast, Bharti Airtel and Reliance Jio are expected to continue their upward trajectories, capitalizing on market dynamics and their stronger financial positions.
