Why did Vodafone Group sell 18% stake in Indus Towers now?

On Wednesday, Vodafone announced that it had sold an 18% stake in Indus Towers for approximately Rs 15,300 crore

Persistent pressure from lenders over an outstanding loan taken around five years ago were among the key reasons why the UK's Vodafone Group PLC sold its stake in Indus Towers on Wednesday. According to sources privy to the internal discussions between the Vodafone Group and its lenders, matters came to a head after a group of foreign banks, led by BNP Paribas, HSBC and Bank of America among others, refused to extend the tenor and demanded full repayment of the loan, which had been raised against Vodafone PLC’s 21.05% stake in Indus Towers in order for it to participate in Vodafone Idea’s rights issue.

On Wednesday, Vodafone announced that it had sold an 18% stake in Indus Towers for €1.7 billion (approximately Rs 15,300 crore). The company said that it will use the major portion of the proceeds to repay €1.8 billion in outstanding bank borrowings secured against Vodafone's assets in India. In a series of block deals, Vodafone Group PLC sold 484.7 million shares in Indus Towers, representing 18% of Indus' share capital, through an accelerated book-build offering.

"The placing raised Rs 15,300 crore (€1.7 billion) in gross proceeds, which will be used to substantially repay Vodafone's existing lenders concerning the outstanding bank borrowings of €1.8 billion secured against Vodafone's Indian assets," it said.

Several domestic and foreign institutional investors, including Norges Bank, Jane Street, SBI Mutual Fund, and Millennium Funds, purchased shares of telecom towers operator Indus Towers from global telecom major Vodafone PLC, according to data from stock exchanges and sources who spoke to Moneycontrol. Bharti Airtel on Wednesday bought around 1% stake in Indus Towers, by acquiring around 26.95 million shares, thus raising its stake to 48.95% from 47.95% it held earlier

“Vodafone has been negotiating with the lenders for an extension for the repayment deadline,” said a person directly aware of the internal deliberations. “Simultaneously, it was also trying to refinance the loan either in parts or in full but was not successful,” the person added. “In the end, the only option was to divest the stake, although the company would have realised a far better value from the deal if it had waited some more time." The lenders had however begun preparations to ‘call the loan’ in the event of a further delay in repayment” the person added further.

An email sent to Vodafone group plc in this remained unanswered until press time on Thursday. BNP Paribas and Bank of America declined to comment while a response is awaited from HSBC.

Notably, the share price of Indus Towers has rallied more than 100 percent in the past year owing to rising investor confidence in the likely turnaround of Vodafone Idea (Vi), a key tenant which still owes around Rs 10,000 crore to Indus, according to industry estimates.

In recent years, Indus Towers has increased its tower portfolio to 2.11 lakh macro towers with record tower additions in FY23. For the first nine months of fiscal 2024, Indus Towers added 18,901 macro towers compared to 13,649 macro towers added cumulatively in fiscal 2022 and 2023. According to industry analysts, the tower portfolio of Indus Towers is well spread across all 22 circles and has over 3.60 lakh tenancies as of December 31, 2023, making it the market leader in India in terms of tenancies. It is also the largest tower company globally, outside China, in terms of tenancies.