Vodafone Idea (IDEA)

FairStock Score: 30/100 — RISKY

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 1/2 · Dividend: 0/1

Key Financials

Strengths

• Piotroski F-Score of 7/9 suggests some recent operational and balance-sheet improvement.
• Latest quarter sales of ₹11,323 Cr show 3.22% growth, slightly above the weak 5-year CAGR.
• Reported profit growth of 3.72%, though on a negative base, indicates losses may be narrowing.
• Promoter holding of 25.57% provides at least some owner alignment, though modest.

Concerns

• Negative book value of ₹-7.61 per share and debt/equity of -3.32 imply the company is technically insolvent.
• Latest quarter net loss of ₹-5,286 Cr and free cash flow of ₹-6,957 Cr show severe cash consumption.
• Altman Z-Score of 0.54 signals high financial distress risk.
• EV/EBITDA of 546.76 and ROCE of -1.93% indicate extreme overvaluation and value destruction.

AI Analysis

Applying Graham's first test -- is this a business I can understand and would buy for its economics? Vodafone Idea, for me, is easy to understand but impossible to value on a fundamental basis. At ₹9.58, the market capitalisation is ₹1.15 lakh crore, yet the book value is minus ₹7.61 per share. In other words, the equity is underwater. A positive ROE of 26.13% is an accounting illusion created by a negative equity base; the real return on capital employed is minus 1.93%. The company destroyed cash: free cash flow was minus ₹6,957 crore and the latest quarter alone lost ₹5,286 crore. With an Altman Z-score of 0.54, this balance sheet sits in the danger zone. Paying 546.76 times EV/EBITDA for a business with such economics is not investing; it is hoping. Growth does not help either. The 5-year revenue CAGR is 0.76%, and the latest quarter's sales growth is only 3.22%. Telecom may have a moat, but Vodafone Idea has not demonstrated pricing power or operating leverage. The Piotroski F-score of 7/9 is the only positive signal, hinting at recent operational improvement; and profit growth of 3.72% is directionally better. But those are tiny glimmers relative to the negative equity, negative free cash flow, and 25.57% promoter stake that leaves outsiders to bear most of the risk. In Buffett's words, we should stick to businesses with a margin of safety. Vodafone Idea has a negative margin of safety. It is a potential turnaround, not a value investment. I would pass.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer