Indus Towers To See 'Compelling' Dividend Yield After Vodafone Group's Exit
Citi opened a 90-day positive catalyst watch on Indus Towers, citing improved visibility of dividend reinstatement, pickup in tenancies and FCF generation.
Indus Towers Ltd. could benefit from improved dividend visibility after the planned stake sale by UK's Vodafone Group Plc, Citi Research said, while opening a 90-day positive catalyst watch on the stock.
Citi maintained its buy rating on Indus Towers with a target price of Rs 485 per share, implying an upside of 35% from the previous close.
The Vodafone Group will divest its entire 3% stake in the telecommunication infrastructure company via open market deals, the company said on Wednesday. Based on Indus Tower's last closing price of Rs 358.75, the transaction value is expected to be around Rs 2,841 crore.
The proceeds from the divestment will be used to repay Vodafone's outstanding borrowings of around $101 million to existing lenders, secured against Vodafone's Indian assets.
After repaying outstanding borrowings, Citi estimates the residual proceeds at Rs 1,900-2,000 crore. Vodafone Plc would then inject this amount as equity into Voda Idea, which would, in turn, be used by Vi to clear its past dues to Indus, Citi said.
"This amount adds up to Rs 7 per share for Indus, which we believe can then be paid out as a dividend by the company."
Including regular free cash flow generation, Citi expects Indus could be in a position to pay out Rs 11 to Rs 12 apiece of dividends for the second half of the next fiscal and could rise to over Rs 20 per share per annum in fiscal 2026 and the following year. "This implies a compelling dividend yield of 6% over fiscal 2026-27 at current levels," Citi said.
The brokerage opened a 90-day positive catalyst watch citing improved visibility of dividend reinstatement, upcoming pickup in tenancies from Vodafone Idea and declining capex aiding FCF generation.
Indus Towers, India's largest mobile tower installation company, became a subsidiary of Bharti Airtel Ltd. in August, following the buyback of shares. As of September, the Sunil Bharti Mittal-led telecom company had 50% equity in the company.
The stock has risen 92% during the last 12 months and has declined by 79% on a year-to-date basis.
Of the 23 analysts tracking the company, 12 have a 'buy' rating on the stock, five suggest a 'hold' and six have a 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 13%.
