Indus Towers shares are in focus on Wednesday after the stock received an initiation from global brokerage firm, Nomura, which remains bullish on the stock, implying an upside of almost 18%.
In its latest note, Nomura has highlighted strong structural data growth for Indus Towers whereas the improving outlook for Vodafone Idea could be another big lever for the company.
The brokerage believes rising data consumption in the country and the gradual shift to 5G will also serve as key growth drivers for Indus Towers, as it would lead to higher equipment loading on telecom towers. This in turn would lead to increase loading revenue without any meaningful increase in costs.
Therefore, as data usage prompts operators to roll out more 5G sites, Indus may also see higher tenancy ratios.
This is where Vodafone Idea comes into the fray. Nomura adds that the fortunes of Indus and Vi are deeply intertwined, with Vi being one of Indus Towers' key anchor customers alongside Bharti Airtel.
As Vi raises funds and expands its existing 4G capacity while rolling out 5G, it adds new tenancies to Indus. Nomura expects Indus to capture 70% of Vi's incremental network rollout, thus boosting the company's core revenue and Ebitda. This would go a long way in offsetting the potential loss of some tenancies from Reliance Jio over FY27-28.
As far as dividends are concerned, Nomura estimates a total dividend payout of Rs 19 per share by Indus Towers in FY26. The brokerage believes the dividend dilemma has kept valuations supressed and a probable dividend reinstatement could serve as a key trigger.
On the valuation front, Indus trades at a signfiicant discount to global peers as well as domestic telecom companies. Nomura values the company at 7.5x FY28 EV/Ebitda.
Keeping all these factors in mind, Nomura has initiated coverage with a 'buy' call and a target price of Rs 490.
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