Stock in Focus: Vodafone Idea may rally over 20%; Citi raises target price; here's why

Shares of Vodafone Idea Ltd (Vi) traded higher on Tuesday after global brokerage Citi removed its “High Risk” classification on the telecom operator and raised its target price to Rs 17 from Rs 14, citing improving financial stability, easing leverage concerns and better visibility on future funding.

At 1:37 pm, Vodafone Idea shares were trading at Rs 14.03 on the NSE, up 0.57 per cent from the previous close. The revised target price implies a potential upside of more than 21 per cent from the current market price.

Debt reduction boosts investor confidence

In a research note dated June 2, Citi said it has updated its estimates to reflect Vodafone Idea’s FY26 financial performance and the government's reassessment of adjusted gross revenue (AGR) liabilities.

While the brokerage made only limited changes to its operating forecasts, it highlighted a sharp decline in the company’s debt burden during the March quarter.

According to Citi, Vodafone Idea’s net debt fell to around Rs 1.5 lakh crore in Q4FY26 from nearly Rs 1.9 lakh crore in the preceding quarter, marking a significant improvement in the company’s balance sheet.

Promoter funding seen as strong signal

The brokerage also cited the Aditya Birla Group’s Rs 4,700 crore equity infusion through warrants as a key positive development.

The investment, equivalent to around 3.8 per cent of the company’s equity, is expected to strengthen lender confidence and support Vodafone Idea’s efforts to secure fresh bank funding for network expansion and operational requirements.

Crisil rating action improves funding prospects

Citi further noted that Crisil recently assigned an A-/Stable rating to Vodafone Idea’s proposed banking facilities, including a Rs 25,000 crore term loan and Rs 10,000 crore non-fund-based limits.

The rating upgrade is expected to improve the company’s access to institutional financing and reduce concerns surrounding liquidity and cash flow management.

"Taken together, these developments materially alleviate leverage and cash flow concerns for Vi," Citi said in its note.

Higher valuation multiple drives target price revision

Reflecting the reduced risk profile, Citi increased its valuation multiple to 13 times enterprise value-to-EBITDA from 12 times earlier.

As a result, the brokerage raised its target price to Rs 17 per share and retained its "Buy" recommendation, saying concerns regarding Vodafone Idea’s ability to continue as a going concern have diminished considerably.

Turnaround efforts remain under watch

Vodafone Idea reported a net profit of Rs 34,552 crore in FY26, compared with a loss of Rs 27,383 crore in the previous financial year, aided largely by exceptional gains and government-related support measures.

However, Citi expects the company to remain in the red over the next few years despite gradual improvements in operating performance and revenue growth.

Market participants will continue to monitor the telecom operator’s fundraising efforts, network expansion plans and subscriber trends as it seeks to strengthen its position in India’s highly competitive telecom sector.