Government’s push has create some hope for Vodaphone Idea survival, Also some unauthorised news floating of promoters fund infusion in Vi.
Last few sessions Indus Tower price is near 52 week high with higher volumes indicate some sign of re-rating or institutional buying.
Also new energy seen in Vi’s management approach after government releaf, Earlier they was ready to given stack for free now they are talking about new fund infusion.
Survival of Vi will help company to work on multi-tenancy model and this will result with high RoCE.
All factors look positive for indus tower in near term.
Interesting. I sold all my shares on this once it was slightly above my average buy price. I simply could not see how they would make good money when the VI CEO said he doesn’t expect the GOI to bail them out when they already have 2 sick units of MTNL and BSNL. I took that as a good signal and completely exited the stock of Indus.
Look like indus towers has invoked these pledged on vodafone group promoters for not cleaning dues…?now entire vodafone stake is pledged to indus… Which means vodafone promoter stake is pledged to remaining shareholders of indus …? Is this correct…?
Indus has not invoked the pledge… it has increased the Pledge percentage in order to safeguard the payment obligation of VI.
Yes entire stake is pledged. However, we should not think that VI stake is pledged to other shareholders of Indus. According to me this is not correct.
Currently its pricing in 7% CAGR growth for next 7 years (expected due to 5G) and then 4% cagr terminal growth (3% is auto rental growth as per MSA) to make 15% CAGR return.
Above assumption is very conservative - i am taking just 4% additional growth due to 5G in next 7 years.
Even during today’s carnage, today’s fall of 18% in Indus towers appeared to be an over re-action. Vodafone Plc seems to have sold 2%+ stake but that should be seen positively as they will infuse that amount into ViL which will improve ViL’s chances of survival. That should have been quite positive for Indus Towers.
Am I missing something or market did not have attention to rationalize information due to war scare.
I agree with you, after the stake sale , they will have the firepower to extend more of there towers for 5g etc.
Should have been positive , but Market Sentiment is too Negative.
Jefferies had re-iterated same logic as Vodafone Plc sale proceeds will go to infuse funds in Vodafone India, which helps clear Indus dues and also makes Vodafone India sustainable. Biggest risk for Indus is sustainability of Vodafone India. But govt being biggest shareholder and biggest lender (thru PSU banks) will use every policy measure to ensure Vodafone India does not fold up.
Takeway from Airtel press release on buying 4.7% stake in Indus tower from Vodafone Parent.
Buying price will be at discount to what Vodafone paid in recent block deal.
Vodafone will use the money to pay its dues to Indus tower.
With the likely introduction of 5G in the future, Airtel believs a lot more infrastructure would be required in which Indus Towers, an undisputed leader, has a significant role to play and partake the potential growth in the business.
Airtel believes 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.
Airtel remains committed to look at opportunities for monetizing this vital asset at an appropriate time. In doing so it will ensure that the company has been stabilized and any new strategic or financial investor/s has the ability to continue to serve the critical needs.
From Airtel press release : “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 as also paves the way for subsequent financial consolidation of Indus Towers in Airtel.”
Airtel currently owns 41% of Indus Towers. Post this transaction, this will jump to ~46%. But the fact that they talk about “subsequent financial consolidation” implies that they will acquire at least another 4% in Indus at some point? At the same time they talk about monetization at an “appropriate time”. So looks like the road map is
Go above 50% right now.
Telecom industry becomes a (viable) 3 player market. V! dues become regularized/stable (vs. current delayed payments).
Indus Towers captures the 5G growth opportunity
Airtel (after a few years monetize their holdings at a (likely significant) premium to current valuations assuming that Indus then should be able to fetch multiples at least somewhat closer to global tower cos.
Any thoughts? Not sure how the street reacts right away but if you plan to hold Indus Towers for the next few years, difficult to think this is anything but a positive.
Agree. Airtel first wants to make Indus tower a stable business. If they monetise now, no financial investor is going to buy at premium or even current price because of issues with Vodafone Idea.
To me, the current price of Indus tower discounts the event of Vodafone going bakkrupt. Even if the profit falls to around 2000 crores in the worst case of VI going bankrupt, the current price implies a PE of around 30.
There only three tenants in the market and one of them is their own parent. Does the parent allow them to increase the rent ?
What are the historical trends of the revenue per tower ?
Is there increase in the revenue per tower ?
If at all are they increasing and beating the inflation ?
These are pure annuity kind of businesses where one goes and invest in the hope of good dividend but underlying asset might not have any kind of appreciation as such.
Two such businesses are power transmissions (Invits ) and REITS. In later case we can think of asset appreciation ( unless they sell and monetize the land / building ) where as former is always depreciating asset
Indus tower does has a contract for rental escalations and exit penalties. Someday, Airtel is going to monetise the holdings in Indus tower and it will not be the parent after that. The same happened in case of Jio which sold its tower assets to Brookefield. We also need to consider that 5G will help in increasing the revenue along with rental escalations.
I would recommend you to go through the below post to get answers to some of the questions that you have asked.
Currently they are the biggest tower company in India and 2nd in the World .ARPU for telecom providers were at record low and still company has managed a yield of 10% with rumours of whether vodafone idea will survive or not is behind us and they clearing debt , hopefully paying rent on time in future and ARPU expected to rise will only mean good things for the Indus tower as well.
I think tenant being the parent company is more of a boon then a curse ,they will choose Indus over Brookfield or other competitors and for a tower to be profitable it needs to minimum 2 tenant guess what if there are 2 shopkeepers and 3 customers and 2 customers are one of the shopkeepers brother guess who gets the business.It might even lead to other shopkeeper shutting shop but that might not happen as the other shopkeeper (brookfield) friend is reliance .
This is a very good question ,We have given one of our properties to Indus tower they always pay rent on time and there is a 15% rent increment every 3 years so pretty sure there are rent escalation clause as they have maintained margins throughout but will do more research and find out soon .
True the asset might not appreciate but if you believe india will get 5g ->6g->7g then more towers will be build ,if you believe going forward more more internet users will be added in India ,then the topline will increase meaning a 10 % Yeild will become 15%.
disc:Invested vies maybe biased.I feel it is better way to invest in India telecom sector rather then airtel or a future Jio Ipo.
VI is losing a million or 4 customers every month. Gov or PSUs won’t be able to do anything for 0 customers company someday. Even if Gov takeover continue to run it like BSNL, Gov will tell VI to take off all the cells from the tower to cut cost / loss as those cells on the towers serving 0 customers.
Airtel would buy 4.7% stake likely under Rs. 225, As Airtel is protected with a capped price lower than block deal happened on Thursday which was 226.84.
