Indus Towers Limited

Potential impacts for Indus from the VI stake sale:

• Outstanding VI dues can be paid off in full: estimated VI dues based on accounts receivable and online reports is around ₹6,000~₹7,000 Cr. VI’s stake in Indus is worth ₹19,330Cr. Of course, VI also owes other people a lot of money, so not sure whether Indus’ VI dues will be fully cleared after the stake sale, but I expect a big part of the dues to be paid off.

• If there is a lot of demand for the stake at current prices, that will provide the market assurance that Indus Towers’ share price is not overvalued. However, if there is no demand or less demand than VI expects, it could have the opposite effect.

• FII/DII purchasing VI’s stake could mean a board re-jig, with VI board members replaced by the new FII/DII representatives. I view this as positive for common shareholders, as the new board members will be incentivized to increase shareholder value more than VI board members (will reduce some of the existing conflict-of-interest within the board). If Airtel buys vodafone’s stake, then it will have the opposite effect. More Airtel board members and stake will effectively make Indus a subsidiary of Airtel, which I don’t view as favourable (as then board has incentives to favour Airtel rather than the Indus common shareholders)

Disc. : invested / potentially biased

PS: I had valued Indus approximately 1 year ago, in July 2023. The shares seem fairly priced now, as shares are slightly higher than the “base case”:

Thanks,
Sharad
OpenSourceInvestor @ Substack