Vodafone Idea Shares Drop as Q2 Net Loss Widens to Rs 5,975 Crore Amid Margin Squeeze

Shares of Vodafone Idea Limited (VIL) dropped by as much as 3% in intraday trade on the NSE and BSE following the telecom service provider's second-quarter earnings announcement. The company's widening net loss, combined with sequential operating margin contraction and moderate average revenue per user (ARPU) growth, weighed heavily on investor sentiment.

Losses Widen on Exceptional Charges and Operating Costs

For the quarter ended September, Vodafone Idea posted a consolidated net loss of Rs 5,975 crore, widening from a loss of Rs 3,754 crore in the preceding June quarter and Rs 5,524 crore in the year-ago period.

The telecom operator's bottom line was impacted by a one-time exceptional charge of Rs 462 crore related to the fair-value remeasurement of equity shares earmarked for settlement with Vodafone Group entities. In the previous quarter, a net exceptional gain of Rs 1,611 crore had supported the reported figures, creating an adverse sequential swing of over Rs 2,000 crore. Excluding exceptional items, the net loss stood at Rs 5,513 crore.

Revenue from operations grew 1.6% quarter-on-quarter and 6.15% year-on-year to Rs 11,884 crore, marginally missing consensus analyst estimates. Consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) dropped 1.1% sequentially to Rs 4,981 crore, resulting in an operating EBITDA margin contraction to 41.9% from 43.1% in the preceding quarter.

Brokerage Views: Nomura Cautions on Margins and ARPU Momentum

Global brokerage Nomura maintained a cautious stance on Vodafone Idea, highlighting pressure on operating margins and sequential moderation in ARPU expansion. The brokerage retained its 'Neutral' recommendation on the stock, noting that while premiumisation and user migrations are helping operational realizations over a 12-month horizon, near-term profitability remains constrained by elevated operational and network rollout expenses.

Brokerages highlighted several key operational metrics from the print:

• ARPU Trends: Customer ARPU (excluding machine-to-machine connections) rose marginally to Rs 198 per month from Rs 195 in the preceding quarter and Rs 180 a year earlier. Blended ARPU stood at Rs 178, up 0.6% sequentially.
• Subscriber Metrics: Total customer base reached 194.4 million at the end of the quarter, up from 193.1 million in June, with 4G and 5G subscribers accounting for 131 million users.
• Capital Expenditure Acceleration: Quarterly capex surged sequentially by 104.5% to Rs 3,946 crore as the operator stepped up network deployment across priority circles.

Other domestic and global brokerages offered divergent perspectives on the stock's trajectory. JPMorgan maintained an 'Underweight' rating with a target price of Rs 9, warning that persistent subscriber churn risks and delay in closing long-term funding remain overhangs. JM Financial retained an 'Add' rating with a target of Rs 14.70, pointing out that upcoming spectrum repayments—estimated at Rs 7,000 crore, Rs 15,000 crore, and Rs 27,000 crore across FY27 to FY29—require swift balance-sheet deleveraging and regulatory support. Ambit Capital retained a 'Buy' rating with a target price of Rs 18.70, citing long-term valuation upside from ongoing 4G and 5G network expansion.

Funding and Debt Obligations in the Spotlight

Market participants continue to focus on Vodafone Idea's planned bank debt syndication of Rs 25,000 crore to Rs 35,000 crore. The company has placed network vendor orders worth more than Rs 13,200 crore to expand 4G coverage and roll out 5G across 17 priority circles.

Management reiterated that discussions with a consortium of public and private sector lenders remain active, and closing the debt package is crucial to maintaining network competitiveness against larger rivals Reliance Jio and Bharti Airtel. Until the bank facilities are finalized and revenue realization improves more meaningfully, analysts expect the stock to remain range-bound with elevated volatility.