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SumanSpeaks Independent Capital Markets & Geopolitical Intelligence POLITICAL ECONOMY | PART 1: THE TELECOM TEST The Sangh’s Costliest Blunder: Keeping Narendra Modi in the Chair After Demonetisation and a Trail of U-Turns Two private giants, one state-propped survivor, roughly ₹3.22 lakh crore in announced BSNL revival and support packages (spectrum allocation included), and ₹1.41 lakh crore of AGR dues still on the books: telecom shows what happens when one man’s brand becomes the party’s only policy. This is an argument against Narendra Modi, not against the BJP. SYNOPSIS India’s telecom market has narrowed from a messy but real plurality into two dominant private networks, one weak private survivor kept alive by government equity, and a public operator that has needed about ₹3.22 lakh crore in announced support packages and spectrum allocations, not all of it cash. The 2010 spectrum auctions that started the debt spiral were a UPA-era event, and we say so plainly. But a ...

IIFL’s ₹4 Target for Vi: Call Dropped or Misconnected?

IIFL Securities slapped a ₹4 ($0.05) price target on VI, but many argue it’s too pessimistic. Here’s why it doesn’t add up with VI’s current trajectory:

πŸ’’Ignoring the Debt-to-Equity Boost: VI’s massive ₹1.2 trillion ($14.5 billion) debt restructuring, including the March 2025 conversion of ₹36,950 crore ($4.4 billion) into equity, handed the government a 48.99% stake. This slashes annual interest costs by ₹8,000–10,000 crore ($0.96–1.2 billion) and frees up cash. IIFL’s ₹4 target seems to shrug off this relief, which drops VI’s debt-to-profit ratio from 8x to 3x by FY25—making it look much healthier to investors. With the government as a near-49% owner, VI’s practically a semi-public company now, adding stability IIFL might be underplaying.

πŸ’’Underestimating Cash Flow Growth: VI’s operating profit (cash EBITDA) sits at ₹10,000 crore ($1.2 billion) today but is projected to hit ₹30,000–40,000 crore ($3.6–4.8 billion) by FY27. That’s a 3x jump, driven by lower debt costs, 5G rollout, and network upgrades funded by ₹15,000–20,000 crore ($1.8–2.4 billion) in freed-up cash. IIFL’s target doesn’t seem to factor in this growth or the 15% yearly rise in telecom demand. Other analysts—like Nomura (₹10), Citi (₹12), and Jefferies (₹15)—see this upside, making ₹4 look stuck in the past.

πŸ’’Missing the PSU Advantage: With the government holding 49%, VI’s not just another private telecom—it’s got PSU-like perks. This means easier fundraising (like the ₹18,000 crore public offer in 2024 and ₹1,980 crore from promoters in December 2024) and a trust boost for investors. A potential credit rating upgrade (e.g., S&P to BBB-) could cut borrowing costs by 2–3%, saving more cash. IIFL’s ₹4 feels blind to this shift, treating VI like it’s still drowning in debt with no lifeline.

πŸ’’Stock Momentum Says Otherwise: VI’s stock hit ₹8.56 on April 1, 2025, after more than 20% surge, intraday—its biggest in 15 months. This reflects market excitement over the equity conversion and 5G plans. IIFL’s ₹4 implies a 50%+ drop from today’s price, which clashes with VI’s fundraising success and government backing. 

Analysts like Jefferies even peg asset sales at ₹5,000–7,000 crore ($0.6–0.84 billion), further lifting value IIFL seems to ignore.

πŸ’’Sector Benchmarks Don’t Match: Telecom peers like Bharti Airtel trade at 10x their operating profit (EV/EBITDA). If VI hits ₹30,000 crore EBITDA by FY27, its valuation could justify ₹12–15 per share—miles above ₹4. IIFL’s conservatism might stem from older fears (e.g., VI’s ₹2.3 trillion debt), but it overlooks how government support and cash flow changes rewrite the story.

Counterpoint: Why IIFL Might Stick to ₹4To be fair, IIFL could be worried about execution risks—5G delays or subscriber losses to Jio and Airtel (VI’s market share dropped 50% since 2018). The remaining ₹29,000 crore ($3.5 billion) debt due in FY26 might also spook them. But even then, their target feels dated, missing VI’s fresh momentum and government cushion.

Crisp Takeaway: IIFL’s ₹4 target looks illogical because it discounts VI’s debt relief, cash flow surge, and near-PSU status. With the stock at ₹8.16 and analysts eyeing ₹12–15, ₹4 feels like a relic of VI’s darker days. The government’s 49% stake and 5G push make this a turnaround story—not a sinking ship.

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