Goldman Sachs, a worldwide trading company, has issued one of the most pessimistic assessments on debt-ridden telecom Vodafone Idea, setting a target price of just Rs 2.5 and indicating a probable 83% drop. As a result, the stock plummeted 8% to a day low of Rs 13.83 on the BSE.

"Vodafone Idea trades at 24x FY26E EV/EBITDA, over 100% more than Bharti and Jio. Given the company's inferior growth, margin returns, and balance sheet profile compared to rivals, we find no basis for this premium. We maintain a Sell rating with a revised 12-month DCF-based target price of Rs 2.5, representing an 83% decline from current prices," Goldman stated in a report.

Goldman forecasts additional 300 basis points of share loss for Vodafone Idea over the next 3-4 years, arguing that the company's recent capital increase, while marginally good, is unlikely to be sufficient to halt the company's market share losses.

"Additionally, Vodafone Idea has large AGR/spectrum-related payments beginning in FY26; while the government has the option of converting some dues into equity, we estimate ARPUs would have to rise by Rs 200-270 (120%-150% under different scenarios) vs Dec '24E levels for Vodafone Idea to be sustainably free cash flow neutral, a low probability in the medium term in our opinion.

"Excluding the impact of any potential conversion, we expect free cash flow to be negative at least until FY31," Goldman's Manish Adukia stated.

Vodafone Idea has raised Rs 20,100 crore in equity via a follow-on public offering and cash injection from promoters. In addition, the corporation plans to incur additional Rs 25,000 crore bn in debt.

"For Vodafone Idea to be free cash flow (FCF) neutral, we estimate ARPUs would need to increase to 2.2-2.5x from December '24E levels by FY27E." In our base case, we expect an annual ARPU rise of roughly 15%, consistent with the latest rate hike, implying Vodafone Idea would need 6-7 years of 15% annual pricing increases to be FCF neutral," the brokerage added.

Vodafone Idea, India's third-largest telco with a 17% revenue market share, has regularly underperformed its peers, losing around 500 basis points of revenue market share in the previous three years. According to Goldman, Vi may lose further market share as its expenditure lags that of others.