Citi Research raised its target price for the shares of Indus Towers Ltd to Rs 320 from Rs 265 on the back of the company's improving free cash flow generation, and pending completion of Vodafone Idea Ltd's fund raise due on February 27. The fund raise can drive further upside for Indus Towers and will be a key factor to monitor, said Citi Research.
The new target price set by Citi Research for Indus Towers is 30 percent higher than the stock's current price of Rs 246. The brokerage retained 'buy' rating on the Indus Towers stock. Indus Towers' shares have jumped more than 20 percent year-to-date, sharply outperforming NSE Nifty 50, which is up 1.75 percent.
Citi Research analysts said in a note that Indus Towers can recover nearly half of its Rs 5,700 crore past outstanding dues from Vodafone Idea over the next two years. Vodafone Idea has stated that the company will prioritise clearing vendor dues after its fund raise. The telecom company had repaid Rs 300 crore to Indus Towers in January of this year.
ALSO READ: Vodafone Idea shares slip ahead of board meet to discuss fundraising
Apart from Vodafone Idea's renewed fundraising attempts, positive outcome from the AGR (adjusted gross revenue) curative petition filed with the Supreme Court, and higher and earlier-than-expected tariff hikes could also aid Vodafone Idea's EBITDA further, said Citi Research.
Citi Research highlighted that any delay in tariff hikes, dismissal of the AGR curative petition by the Supreme Court, and the inability of Vodafone Idea to complete its fund raise could weigh on the stock sentiment for Indus Towers.
Citi Research believes that Indus Towers should trade at a premium given its better tenancy ratio and lower exposure to Vodafone Idea.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
