Vodafone Idea shares in focus; Jefferies sees 25% operating profit CAGR

On Thursday, Vodafone Idea shares remained in focus after global brokerage firm Jefferies maintained a bullish outlook on the stock. The stock was trading at ₹15.26 on the NSE, down nearly 2% from the previous close of ₹15.52. Jefferies anticipates a 25% compound annual growth rate (CAGR) in operating profit for Vodafone Idea Limited (VIL), which is fueled by operating leverage, stabilising subscribers, and increased earnings from higher tariffs.

The brokerage has designated Vodafone Idea as a high-beta turnaround opportunity in the Indian telecom sector, but has also identified existing execution and funding risks. Jefferies explains that network investments by the company are reducing customer churn and supporting new customer additions, paving the way for an operational recovery.

The company's ongoing network rollouts are expected to translate tariff increases into higher revenue and help the firm maintain its market share. Network investments are already contributing to lower churn and will likely continue to do so while boosting gross subscriber additions, leading to a turnaround in subscriber additions from FY28, according to Jefferies.

Operating profitability projections by Jefferies show an 840-basis-point expansion in cash EBITDA margins to 29% over the FY26–29 period. Incremental EBITDA margins are expected to rise further to over 60% from FY30 onwards once network rollouts become more stable, leading to cash EBITDA growth through FY31. Regarding funding and cash flows, Jefferies notes that while operational cash flows will expand, cash outflows will surge to over ₹400 billion annually during FY29–34, creating a temporary cash flow imbalance.

The brokerage believes this situation will be resolved over FY30–34, with another ₹160 billion equity injection feasible if the company continues to demonstrate improved operational performance.