A very good news is coming for investors who have invested money in Bharti Airtel and Vodafone Idea. Recently, the Bombay High Court has completely canceled the huge demands of the Department of Telecom (DoT) to One-Time Spectrum Charge (OTSC). This decision of the court has brought huge relief to both the big telecom companies. Famous brokerage firm Nomura believes that this decision is very positive for the future of both the companies and their shares may see a good rise in the coming days. However, Nomura has given its ‘Buy’ rating on Airtel shares, while maintaining ‘Neutral’ rating on Vodafone Idea.

Why is Nomura bullish on Airtel?

Brokerage firm Nomura has set a target price of Rs 2,220 for shares of Bharti Airtel. If seen from the current levels, a potential growth of about 25% is clearly visible in this stock. According to the company’s FY25 annual report, Airtel has already made provision for Rs 1,810 crore of principal amount and Rs 9,950 crore of interest on it out of the original demand of Rs 8,410 crore. This means that the company has already made a provision of approximately Rs 11,760 crore in its account.

Nomura says that if the final decision in this case also comes in favor of the company, then Airtel can get a possible write-back of up to Rs 11,760 crore. However, this will only be an accounting adjustment and will not have any major direct impact on the company’s daily cash flow or financial position. But the brokerage believes that Airtel’s business model is very strong, the company is continuously generating good cash flow and its valuation also looks quite attractive.

Relief for Vodafone Idea, but challenges remain

On the other hand, Nomura has given a target price of Rs 12.60 for Vodafone Idea and has maintained its ‘Neutral’ rating. This simply means that the brokerage firm does not see any significant rise in this stock in the near future. The company has made a provision of Rs 7,580 crore for this entire matter and has also shown a contingent liability of Rs 3,350 crore.

However, there is a big complication associated with Vodafone Idea. This latest decision of the High Court is applicable only to the one-time spectrum charge to their old ‘Idea’ business. Whereas a similar case to the old ‘Vodafone’ business is still pending in the Supreme Court. Nomura believes that the possible reversal of Rs 7,580 crore could prove to be very important for Vodafone Idea, as the company is already struggling with serious problems like heavy debt, negative net worth and weak cash flow.

What will investors keep an eye on going forward?

According to market experts, raising new debt, increase in mobile tariff and improvement in the number of customers will prove to be the biggest triggers for further rise in the share of Vodafone Idea. On the other hand, the biggest risk for Airtel is that if competition among companies in the telecom sector suddenly increases or there is a delay in tariff increase, then it may impact the company’s estimated earnings.

What is the last message for investors?

Brokerage firm Nomura has clearly explained to the investors that this decision of the Bombay High Court has definitely brought a sigh of relief for both the companies, but it should not be considered as the final decision at all. This order can be challenged by the Telecom Department in the Supreme Court. Therefore, investors investing in this sector should also keep an eye on the further legal court proceedings.