Talk of the Tower: Airtel eyes Vodafone's 21.05% in Indus

is in talks to buy UK-based 's 21.05% stake in , which could potentially give India's second ranked telco a controlling interest, said two people aware of the matter. If Plc sells its stake to Airtel, it could infuse some of the proceeds into (Vi), its cash-strapped, local venture with the Aditya Birla Group, industry experts said.

However, talks are stuck over valuation, with the Sunil Mittal-led unwilling to acquire Vodafone's stake at the current Indus share price, which has jumped over 77% since January. Airtel, instead, wants a valuation of ₹210-212 a share, or the level at which US private equity fund KKR and Canadian pension fund CPPIB had sold stock in Indus in February 2024.

Airtel is the biggest shareholder in Indus, with 47.95%; Vodafone Group has 21.05% and 30.97% is with the public, according to the tower company's latest filing with the BSE. A buyout of the Vodafone stake will boost Airtel's shareholding to 69%.

Indus shares ended 2.9% higher at ₹359.65 on the BSE on Tuesday, giving it ₹96,923.41 crore market capitalisation.

Burden of dues
At this level, the 21.05% stake will cost Rs 20,402.37 crore, while at Rs 210-212 per share, the deal will be worth around Rs 12,026 crore. Bharti Airtel shares jumped 3.4% to close at Rs1,342.30 on the BSE on Tuesday.

"Airtel is likely to push Vodafone Plc for a sharp discount (to Indus' current share price) as it believes the business challenges for Indus very much remain, as key client Vodafone Idea is yet to close its full fundraise and has also not shared any concrete plans around clearing its massive backlog of old dues (to Indus)," said one of the people cited above.

Vi chief executive Akshaya Moondra recently told ET that the telco would not be using the proceeds of its just-concluded Rs 18,000 crore follow-on public offer (FPO) to clear dues of any promoter or promoter group entity, alluding to Indus. It expects to pay vendor dues out of the cash flows generated from operations, he said. He also didn't give any timeline for clearing the Indus dues.

Vi accounts for 35-40% of the tower company's revenue. Ambit Capital estimates Vi still owes Indus around Rs 10,000 crore. Lately though, Vi has begun clearing its substantial dues to Indus, boosting the tower company's net profit in the fiscal third quarter.

Indus operated 211,775 towers at December-end, with Bharti Airtel and Vi as its main customers.

Bharti Airtel, Vodafone Plc and Indus Towers did not respond to ET's queries.

The Indus issue
Airtel managing director Gopal Vittal had said on an earnings call in May 2023 that the tower infrastructure business - a reference to Indus - is key to telecommunications and must be kept stable. In order to prevent volatility, Airtel may even take control, he had said.

On the other hand, the telco has also said Indus is better off independent and that it will pare its stake over time.

Moondra had also told ET that Vodafone Group remains committed to Vi and can invest in the telco by monetising its stake in Indus. He said Vodafone's own shareholders have asked the UK company to ringfence local operations with Indian assets. "So, their (Vodafone Group) source of funding is limited, and generally, if one has to look at monetisation of Indus, then they would want Indus to get to its fair value. It has actually re-rated quite a lot," said the CEO.

Source: Stocks-Markets-Economic Times