Deustche Bank downgrades Idea Cellular Ltd to “hold” from “buy”,citing regulatory risks and valuations after the stock outperformed the benchmark index over the past six months.
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The bank says Idea’s recent outperformance already discounts hopes about execution,margin expansion and positive cash flows that were the main premise for its previous “buy” rating.
Deutsche also warns costs associated with the government’s move to reset reserve prices and terms for license renewals could “significantly” exceed Idea’s free cash flow over the next three years.
Idea shares gained 36.3 percent in 2013,as of Friday’s close,compared with a 0.2 percent fall in India’s benchmark index over the same period.
At 0556 GMT,Idea shares are up 2.1 percent.