Citi has issued a ‘buy’ rating on Indus Towers shares, setting a target price of Rs 458 per share, following UK-based Vodafone Group Plc’s decision to sell its remaining 3 percent stake in the Indian firm. The brokerage said the funds from Vodafone’s complete exit from the Indian towers company are likely to find its way back to Indus Towers shareholders as dividend with attractive yields.
Indus Towers stock closed at Rs 359.30 on Wednesday, up 1.53 percent ahead of Vodafone’s announcement. Citi's target price implies an upside of over 27 percent. Over the last year, Indus Towers share price has surged by more than 92 percent, boosting its current market capitalisation to over Rs 94,000 crore.
Earlier yesterday, Vodafone Group announced the sale of its 79.2 million shares in Indus Towers, equivalent to 3 percent of the company’s outstanding share capital, via an accelerated book build offering. The block trade, reportedly expected to raise Rs 2,700-2,800 crore, will mark Vodafone’s final divestment in Indus Towers.
Vodafone's complete exit from Indus Towers to help repay debt
The proceeds will primarily be used to repay Vodafone’s $101 million in borrowings secured against its Indian assets, with the residual Rs 1,900-2,000 crore likely to be infused into its India joint venture Vodafone Idea Ltd (Vi) as equity.
Citi said that the equity infusion into Vodafone Idea would help clear Vi’s outstanding dues to Indus Towers under their Master Services Agreements (MSAs). According to Citi’s estimates, this could translate to Rs 7 per share for Indus Towers, which could be distributed as dividends.
Surplus funds to flow back to Indus Towers shareholders as dividend
The brokerage expects Indus Towers to pay dividends of Rs 11-12 per share for the second half of FY25 and over Rs 20 per share annually in FY26 and FY27, offering a compelling dividend yield of 6 percent at current stock levels.
The sale also concludes Vodafone’s phased exit from Indus Towers. In June 2024, Vodafone sold an 18 percent stake in Indus Towers for Rs 15,300 crore, reducing its holding to 3 percent. Previously, in 2022, Vodafone offloaded a 7.1 percent stake.
Vodafone’s decision to sell its stake in Indus Towers was driven by persistent pressure from lenders to repay loans secured against its Indian assets. A group of foreign banks, including BNP Paribas, HSBC, and Bank of America, had demanded full repayment of borrowings initially raised to support Vodafone Idea’s rights issue, leaving the UK-based telecom giant with limited options but to divest its holdings.
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