Investors continued to dump shares of Idea Cellular following the announcement of its merger with Vodafone. However, many brokerages seem to be united in their view that the deal is certainly beneficial for Idea Cellular.
“While the merger is clearly a positive outcome for Idea as it gives the company scale and access to capital, we believe that defending market share will be a challenge. In our view, Idea’s stock price is already factoring in synergy benefits; hence further upsides will hinge on revenue market share protection,” Religare said.
“The merged entity could be better placed to face the competition, or their peers which is positive for Idea, without which it was vulnerable to competition. Higher-than-expected synergy benefits is the key upside risk for our sell recommendation on Idea,” Citi said in a note.
Shares of Idea Cellular ended down nearly 5% on NSE at Rs 92.85 with volumes of 8.86 crore shares. As far as BSE is concerned, the Idea scrip closed 4.76% lower at Rs 92.95.
This is the second consecutive day of fall for the stock. Shares of the company had ended lower on Monday as well following the merger announcement.
Jefferies believes that the stock price of idea is pricing most of the benefits, but not the risks attached to it. “Our scenario analysis suggests that the merger synergies (also uncertain) are adequately priced into the recent stock price range but not the risks (delays, merger costs, spectrum liabilities etc.). The scale of the transaction and the time required during and post the merger for operations to stabilise make these risks significant and understated at the current stock price levels,” Jefferies stated in a note.