Vodafone Idea rating – Sell: Key variables showed an improving print in Q4

Knowledge utilization grew 8.2% q-o-q to 4,489 bn MB as community high quality improved.

Vodafone Idea’s (VIL’s) Q4FY21 money Ebitda at Rs 22 bn benefited from one-off good points in community value of Rs 4.5 bn; adjusted money Ebitda got here in beneath our estimate regardless of cost-saving efforts. Although VIL has seen marginal enchancment in 4G subscriber (sub) addition and decrease whole subs loss, it’s too little to make any distinction, in our view. We see liabilities arising for cost quickly and VIL could have cashflow mismatch. The efforts to boost funds have additionally not yielded any final result but. Aid from authorities on spectrum cost, and discount in AGR legal responsibility on SC accepting reconciliation are different hopes. Now we have reduce our Ebitda estimates by 11%/14% for FY22e/FY23e, however maintained our goal worth of Rs 5 as we improve the Ebitda a number of to 13.3x (from 10.5x earlier). SELL.

Key variables confirmed enhancing prints: VIL had sub lack of simply 2 mn – similar as within the earlier quarter. Firm has added 4.2 mn 4G subs (it has been enhancing in previous few quarters). Gross sub addition has improved to 22 mn (vs 13.5 mn in previous 12 months), which helps scale back sub loss. Knowledge utilization grew 8.2% q-o-q to 4,489 bn MB as community high quality improved.

Adjusted for IUC influence, revenues down 2.2% q-o-q to Rs 96 bn. VIL’s cellular revenues have been steady q-o-q if adjusted for two days much less through the quarter, and IUC influence. This was regardless of lack of 2 mn subs attributable to rise in 4G subs, which ought to have helped natural ARPU progress. On reported foundation, ARPU was down 11.6% q-o-q to Rs 107. Postpaid sub base has grown marginally by 0.1mn to twenty.9 mn, which ought to have additionally helped.

Money Ebitda (adjusted for Ind-AS 116) at Rs 22 bn. Ebitda at Rs 44 bn was up 2.9% q-o-q attributable to one-off good points in value (community and IT) of Rs 4.5 bn; adjusted Ebitda dipped 7.6% q-o-q regardless of sturdy effectivity in value financial savings. Adjusted for one-offs, community value was down 1.1% q-o-q, worker value fell 13% q-o-q whereas SG&A value rose 18% q-o-q. Adjusted for Ind-AS 116, Ebitda was at Rs 22 bn (up 3% q-o-q and down 18% q-o-q if we alter for one-off good points). Ebitda ought to have been impacted by nil IUC income as VIL was internet IUC receiver earlier.

Whole debt together with AGR dues and accrued curiosity was Rs 1,867 bn. The determine consists of deferred spectrum legal responsibility of Rs 963 bn, AGR legal responsibility of Rs 610 bn, and financial institution borrowing of Rs 231 bn. The liabilities due for cost in subsequent 12 months are: (i) annual cost (consists of curiosity) in the direction of AGR legal responsibility of Rs 80 bn in Mar’22 (that is assuming nil cost for Mar’21 dues, which is but to be clarified); (ii) financial institution assure of Rs 70 bn arising for renewal (VIL has to present extra financial institution assure of Rs 10 bn); (iii) annual cost in the direction of spectrum due in Apr’22 – of Rs 82 bn. Firm has requested DOT for deferment of a few of the funds. We see cost of liabilities coming quickly, whereas fund availability stays a problem.