The brokerage famous that whereas the federal government’s elevated stake eases Vodafone Thought’s quick monetary pressure, the corporate nonetheless faces hurdles in elevating contemporary capital and increasing its 4G and 5G networks.
“In a cloth growth that we view as having vital constructive implications, Voda Thought introduced (March 30, 2025) that the gov’t has determined to transform a part of its excellent spectrum dues to fairness,” mentioned Citi Analysis.
The conversion will likely be executed at Rs 10 per share, representing a 47% premium to the inventory’s final closing worth. Whereas this may elevate the federal government’s complete stake in Vodafone Thought from 22.6% to 49%, operational management will stay with the promoters.
In the meantime, Citi maintained a purchase ranking on Indus Towers, India’s largest telecom infrastructure supplier, with a goal worth of Rs 470, indicating a 40.7% upside from the final shut. The brokerage mentioned an equity-backed revival of Vodafone Thought might enhance Indus Towers’ money stream visibility, on condition that VI is a key tenant and has struggled with tower rental funds.
Shares of Vodafone Thought closed 1.7% decrease at Rs 6.81 on Friday, extending their one-week loss to 11%. The inventory has declined 36% over six months and is down 49% over the previous 12 months. Indus Towers, which fell 1.3% to Rs 334.10 on Friday, has risen 14.8% up to now 12 months however stays down 14.8% in six months.
Authorities steps in as Vodafone Thought seeks survival
The Indian authorities’s stake hike follows the September 2021 Telecom Reforms Package deal, which allowed struggling operators to transform spectrum dues into fairness. Vodafone Thought will concern 3,695 crore new shares price Rs 36,950 crore to the federal government, successfully making it the most important shareholder. Nevertheless, the promoters—UK’s Vodafone Plc and India’s Aditya Birla Group—will retain operational management.The fairness conversion comes at a vital time for Vodafone Thought, which has been battling liquidity constraints and intense competitors from Reliance Jio and Bharti Airtel. CEO Akshaya Moondra had just lately urged the Division of Telecommunications (DoT) to approve complete fairness conversions of Rs 36,950 crore, which he mentioned would ease monetary pressures and facilitate new investments.
Indus Towers to realize from VI revival
Citi mentioned Indus Towers stands to learn if Vodafone Thought stabilizes its operations, because the telecom tower supplier has been beneath stress attributable to VI’s fee delays.
“The scenario has stabilised in current quarters and may enhance going ahead, with Voda Thought lastly finishing its long-pending and essential fairness elevate. We count on Indus to be a major beneficiary with ongoing restoration of its previous excellent dues in addition to graduation of latest tenancy rollouts, which must also allow it to reinstate dividends,” the brokerage mentioned.
Indus Towers’ rental income from VI has been a key threat issue, however Citi mentioned the government-backed restructuring might enhance near-term money flows and scale back default issues. The brokerage believes Indus Towers’ long-term progress prospects stay robust, pushed by rising telecom infrastructure demand and 5G community rollouts.
Citi described Indus Towers as its high telecom choose, projecting a core EBITDA CAGR of 10% (excluding writebacks), pushed by an 8% tenancy CAGR. “The inventory’s implied dividend yield of 5-7% presents a compelling funding alternative, in our view,” the brokerage mentioned.
Whereas the federal government’s fairness infusion presents short-term reduction, analysts imagine Vodafone Thought will want further capital infusion to remain aggressive.
Citi mentioned it has given Vodafone Thought a excessive threat ranking, citing its over-leveraged steadiness sheet and the essential want for continued authorities help. The brokerage identified that debt repayments will rise sharply from October 2025 because the moratorium ends, whereas the Supreme Court docket’s rejection of VI’s healing petition has dominated out any potential AGR reduction, additional straining the corporate’s funds.
For Indus Towers, Citi sees restricted draw back threat, given its dominant market place and anticipated income stability as soon as Vodafone Thought’s monetary well being improves.
As buying and selling resumes Tuesday, Vodafone Thought and Indus Towers will likely be in focus as buyers react to Citi’s suggestions and the broader implications of the federal government’s deepening involvement within the telecom sector.
Additionally learn | Govt to transform VI’s excellent spectrum dues into fairness shares price Rs 36,950, stake to extend to 48.99%
(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t characterize the views of the Financial Occasions)
