Axis Capital has initiated coverage on Indus Towers with an 'Add' rating and a target price of Rs 356, citing signs of recovery after challenging years. The brokerage expects Indus to see improved rental revenue growth, supported by Vodafone Idea's network expansion and Bharti Airtel's transition to 5G.
Additionally, the Supreme Court has allowed telecom and tower companies, including Indus Towers, Vodafone Idea, and Bharti Airtel, to claim Central Value-Added Tax (Cenvat) credits on duties paid for essential infrastructure components like tower parts and shelters. This ruling is anticipated to lower Indus Towers' contingent liability by Rs 3,704 crore.
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At 1:45 PM, shares of Indus Towers were trading over 1 percent higher at Rs 332, which is 7 percent below the target price set by Axis Capital. The stock has gained more than 63 percent year-to-date, significantly outperforming the Nifty 50's 7 percent gain during the same period.
Axis Capital said that Vodafone Idea's efforts to clear dues and pay current charges in full have led to the reversal of its doubtful provisions, boosting Indus Towers' financial outlook. With peak capital expenditure now behind, the company is positioned to achieve healthy EBITDA growth and generate free cash flow, potentially allowing it to resume dividends after two years.
While Vodafone Idea's accelerating capex is a positive, uncertainties around its debt-raising efforts remain a concern, as per Axis Capital. The brokerage advised investors to wait for a better entry point.
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