Telecom investment strategy: Betting on Vodafone's survival via Indus Towers

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Amid divided opinions on the future of Vodafone Idea, Parag Thakkar, Senior Fund Manager at Fort Capital, suggests a strategic approach to investing in the telecom sector. Speaking with CNBC TV18, Thakkar outlined his preference for playing the potential survival of the debt-laden telco not directly, but through an investment in Indus Towers.

While acknowledging that some investors are taking a direct punt on Vodafone Idea in hopes of a three-player market, Thakkar explained why his fund avoids this route. "Because of the net debt to EBITDA number, we cannot buy it in the fund," he stated. He noted that the stock had pulled back after touching the ₹11 level, the same price at which the company raised funds recently.

Instead, Thakkar is betting on the government's intent to save the company. "I expect government, because now government owns around 49% stake in Vodafone, the intent will be definitely to save Vodafone," he opined. Based on this belief, his portfolio has a large holding in Indus Towers, which he sees as a primary beneficiary of Vodafone Idea's continued operations.

Thakkar bolstered his argument for Indus Towers by highlighting several key factors. He pointed out that Bharti Airtel has been consistently increasing its stake in the tower company. Furthermore, he referenced comments from Bharti's leadership, stating, "Mr. Gopal [Vittal] has on record said that Indus Tower offers a deep value compared to the global peers like American Towers." He added that on a market cap to cash profit basis, Indus Towers presents a compelling value proposition.

While his top holding remains Reliance, Thakkar's strategy includes Indus Towers as a calculated and value-driven way to gain exposure to a potential turnaround in the telecom space.