Indus Towers shares surge over 5% on CITI's buy rating; multibagger telco stock up 102% YTD

The Supreme Court last week upheld the AGR ruling against the telecom companies and upheld the quantum of the AGR demand.

Shares of Indus Towers jumped nearly 6 percent on September 23 after CITI issued a 'buy' call on the stock with a target price of Rs 500 per share. The recent Supreme Court dismissal of the AGR petition is not expected to have an immediate impact on Vodafone Idea’s cash flows; however, it could affect near-term stock sentiment, the brokerage said.

Investors are encouraged to view any weakness in share price as a buying opportunity, especially given the attractive dividend yield of approximately 6-7 percent, said CITI.

Key factors to monitor include the completion of Vodafone Idea’s pending debt raise, a reaffirmation of its capital expenditure plans, and the amount of past dues that Vodafone Idea repays to Indus Towers in Q2 FY25.

Global brokerage firm BofA Securities also recently assigned a 'Buy' recommendation on Indus Towers but lowered the target price to Rs 450 per share from Rs 490 per share earlier.

The brokerage wrote in its note that the Adjusted Gross Revenue (AGR) decision is seen as having an indirect impact on the company, with no anticipated effect on tenancy growth.

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BofA Securities also noted the possibility of multiple de-ratings of valuations, and they see a lower possibility of a lump sum payment or any special dividend in the near term. The buy recommendation is based on the stock's attractive valuation, trading at 6.9 times FY26 EV/EBITDA, compared to 12.6 times for global peers.

Meanwhile, Macquarie has issued an 'Underperform' rating on Indus Towers, citing concerns that the company's core earnings may have already reached their peak. With Vodafone Idea (VI) as one of its key tenants, the outlook for future growth appears uncertain, it said.

The top court in its verdict said that it has gone through the curative petitions and connected documents, adding that no case has been made out by the telecom companies.

Therefore, the SC dismissed the petitions. Telecom companies had claimed arithmetic errors in the computation of the AGR dues.

At 9:37 am, Indus Towers shares were trading over 5.7 percent higher at Rs 410.60 on NSE. The stock has rallied 120 percent in the past one year, more than doubling investors' capital. In comparison, Nifty rose 27 percent. Year-to-date, the counter has zoomed 102 percent compared to a 19 percent rise in Nifty.

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