Bharti Airtel dips 3% on plans to buy 4.7% stake in Indus from Vodafone

The agreement in on the principal condition that the amount paid shall be inducted by Vodafone as fresh equity in VIL and simultaneously remitted to Indus Towers to clear VIL's outstanding dues.

Shares of Bharti Airtel were down 3 per cent at Rs 666.90 on the BSE in Monday’s intra-day trade after the company inked a pact with the Vodafone Group to buy additional 4.7 percent stake in Indus Towers.

Meanwhile, shares of Indus Towers traded flat at Rs 215, as compared to a 1.7 per cent decline on the S&P BSE Sensex at 09:28 am. The stock of Vodafone Idea (VIL) was down 1 per cent at Rs 10.18, after hitting low of Rs 10.06 in intra-day trade on the BSE.

Bharti Airtel has entered into an agreement with Euro Pacific Securities Ltd, an affiliate of Vodafone Group Plc for acquisition of stake in the tower infrastructure company. The agreement on the principal condition that the amount paid shall be inducted by Vodafone as fresh equity in VIL and simultaneously remitted to Indus Towers to clear VIL’s outstanding dues.

The said acquisition purchase would be at an attractive price representing a significant discount typically available for such large block transactions. In addition, Airtel is also protected with a capped price which is lower than the price for the block of Indus shares sold by Vodafone on February 24, 2022. This shall be value accretive to Airtel and protect its existing significant shareholding in Indus Towers, Airtel said in an exchange filing.

With this acquisition, Airtel’s shareholding in Indus Towers will increase to 46.4 per cent. Vodafone holds 28.1 per cent stake in the company at present and its shareholding will reduce to 21 per cent.

On Wednesday, February 23, 2022, the UK-headquartered telecom company announced its plan to sell its entire shareholding in Indus Towers. It sold 2.4 per cent stake to an unnamed investor in a block deal on Thursday netting Rs 1,443 crore. The company is in discussions with other investors to sell its remaining 21 per cent.

Vodafone and the Aditya Birla Group ("ABG"), the promoters of VIL, are committed to support VIL in its efforts to strengthen its balance sheet. The first step in this process included the conversion of US$2.1bn of AGR and spectrum interest into equity, which will make the Indian Government the largest shareholder of VIL.

Vodafone and ABG intend to contribute towards an issue of equity shares by VIL once the terms of such a Capital Raise have been evaluated and decided on by the Board of Directors of VIL, Vodafone said.

Motilal Oswal Financial Services believe Bharti may look to acquire additional 5 per cent share, possibly to increase its stake beyond 50 per cent and become the majority shareholder. This will safeguard Bharti’s holding in Indus, which offers it critical infrastructure.

Indus Tower’s Rs 20 per share dividend payment implies a dividend yield of about 9-10 per cent at the current price, which is an attractive near-term opportunity for Bharti. However, with an uncertain outlook, the valuation may remain low, the brokerage firm said.