Indus Towers would stand to receive residual funds, if any, from Vodafone Group Plc’s stake sale in the company, owing to the secondary pledge it has on Vodafone’s 21% stake in the telecom tower provider.
“Indus has a secondary pledge on Vodafone Plc’ 21% stake and if the sale goes through then Vodafone will first clear the dues of the primary pledgers and the residual amount should go towards Indus’ dues with a maximum limit of ₹4,250 crore, directly or indirectly,” Indus Towers’ chief financial officer Vikas Poddar told analysts at JP Morgan prior to the stake sale. The comments were shared by the brokerage to clients in a note.
On Wednesday, UK-based Vodafone Group Plc sold 18% stake sale in India’s largest telecom tower provider for ₹15,300 crore. It said that proceeds will be used to substantially repay Vodafone’s existing lenders in relation to the outstanding bank borrowings of €1.8 billion secured against Vodafone’s Indian assets. The assets include Indus Towers and Vodafone Idea.
On June 18, Indus Towers released pledge on 17.98% shares held by Vodafone in the company, for them to execute the sale.
Poddar told the brokerage that Indus was looking to recover outstanding dues of up to ₹5,400 crore from Vodafone Idea through payment plans. Indus has been collecting 100% of receivables every month since January 2023 and more than that in the third and fourth quarters of FY24, as a result of which there was some unwinding in provision for doubtful debts.
“Given that the equity raise by Vodafone Idea can be used only for capex and not to clear vendor dues, Indus has been in discussion with Vodafone Idea on a plan to clear its provided for dues of ₹5,400 crore,” JP Morgan said, attributing the comments to Poddar.
The brokerage added that Indus did not expect to see any issues in getting incremental tenancy business from Vodafone Idea as it starts to deploy 4G and 5G capex.
India’s third-largest telecom operator by subscriber base recently raised ₹18,000 crore in the country’s biggest follow-on public offer (FPO) this April. The Aditya Birla Group company is in talks with a consortium of banks for ₹35,000 crore in loans. It will use the funding towards 4G and 5G capex over the next three years, giving it ability to meaningfully compete with larger rivals Reliance Jio and Bharti Airtel.
“Indus has done significant tower rollouts for Bharti in rural areas over the last two years that are single tenancy right now. These will be offered to Vodafone Idea as a second tenant. Given the past dues of ₹5,400 crore still pending from Vodafone Idea, Indus won’t be considering new tower capex,” the brokerage added.
It noted that the upside will come for Indus since Vodafone Idea’s tenancies will entail low capex and faster payback period as compared to setting up new towers that have higher cost and longer payback periods. However, new towers for Vodafone Idea may be considered once past receivables are completely paid.
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Published: 20 Jun 2024, 09:37 PM IST