Bharti Airtel share price shed 3 percent in early trade on February 28 after shareholders approved the issue of preferential shares to Google for its Rs 7,500 crore investment and the telecom company entered into an agreement with Vodafone Plc to buy equity interest in Indus Towers.
Bharti Airtel will buy 4.7 percent stake in Indus Towers from Vodafone Plc, the former said in an exchange filing on Friday.
The transaction will be done on the condition that the amount paid shall be inducted as fresh equity in Vodafone Idea and simultaneously remitted to Indus Towers to clear Vodafone Idea’s outstanding dues.
On Thursday, Vodafone Plc sold 2.4 percent stake in Indus Towers to Bharti Airtel as part of the 4.7 percent deal. Prior to the transaction, Vodafone Plc held 28 percent stake in the tower company while Bharti Airtel had 42 percent stake.
"We believe this transaction allows Airtel to secure continued strong provision of services from Indus Towers, protects and enhances Airtel’s value in Indus Towers, enables it to receive rich dividends and paves the way for subsequent financial consolidation of Indus Towers in Airtel," Bharti Airtel said.
Also, on Saturday Bharti Airtel shareholders approved the issue of preferential shares to Google for its about Rs 7,500 crore investment in the company to buy 1.28 per cent stake.
Internet giant Google had last month announced the proposed investment which includes equity investment as well as a corpus for potential commercial agreements, to be identified and agreed on mutually agreeable terms over the next five years.
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Here is what brokerages have to say about the stock and the company:
Jefferies
Brokerage firm has kept a buy rating on the stock but cut the target price to Rs 860 from Rs 910 per share.
The decision to acquire 4.7% stake in Indus Towers can be justified financially, but raises questions over its capital allocation.
In the last 15 months, it has invested Rs 8,600 crore for raising stake in Indus and DTH business and it may raise stake in Indus further; this may derate its multiples.
Citi
The research firm has maintained a buy rating on the stock with a target at Rs 875 per share.
Bharti providing exit to Vodafone should enable Vodafone Idea to complete its capital raise and it protect value of Bharti’s holding in Indus.
The additional allocation of capital by Bharti is unlikely to enthuse investors, while attractive acquisition price offers potential for a meaningful return over long term.
CLSA
The broking house has kept a buy rating on the stock with a target at Rs 915 per share.
The deal is divergent to Bharti’s long-term strategy of monetising tower assets.
At 09:18 hrs Bharti Airtel was quoting at Rs 668.80, down Rs 19.65 or 2.85 percent on the BSE.
The key driver for Bharti’s stock remains the India mobile business.
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