Indus Towers special dividend coming post Vodafone stake sale? Here's what analysts say

Indus Towers may declare a special dividend of ₹15.

Potential equity infusion into Vodafone Idea Ltd., and faster clearing of dues could result in Indus Towers declare a special dividend of ₹15 per share, brokerage firm JPMorgan wrote in a note.

Sources privy to the matter have told CNBC-TV18 that Vodafone is likely to sell its 21.5% stake in Indus Towers through block deals, which are likely to take place soon.

At the current market price, the entire stake could be valued at $2.3 billion or ₹19,300 crore.

What Does A Potential Deal Mean For Vodafone Idea?

Brokerage firm UBS wrote in a note that in case a deal does take place, it is highly likely that the proceeds will be infused into Vodafone Idea. It cited the Vodafone Idea rights issue in 2019, through which the company had raised ₹25,000 crore and in which, Vodafone had subscribed to shares worth ₹11,000 crore. To fund this, Vodafone had pledged its stake in Indus Towers.

As of March 2024, Vodafone's borrowing secured against Indus Towers stood at €1.72 billion or $1.84 billion.

"Therefore, Vodafone Group would likely settle the secured loan, leaving potentially $500 million to be infused into Vodafone Idea," UBS wrote in a note, assuming that Vodafone sells its entire stake in Indus Towers at the current market price.

Although there is also an option that Vodafone may infuse the entire stake sale proceeds into Vodafone Idea, UBS says this scenario is highly unlikely.

Vodafone Idea recently raised ₹18,000 crore through India's largest Follow-on Public Offer (FPO) and another ₹2,075 crore through a promoter group entity, thereby completing its ₹20,000 crore equity fund raising exercise. It also said that talks are ongoing to tie up debt funding to the tune of ₹25,000 crore.

The company also recently issued equity shares to its vendors Nokia and Ericsson to clear some of their past dues worth ₹2,458 crore.

What Does A Potential Deal Mean For Indus Towers?

In a separate note, brokerage firm JPMorgan wrote that in case the deal does go through at the current market price, the proceeds worth $2.3 billion will first used to repay Vodafone's lenders, while the rest could be used to clear Vodafone Idea's past dues worth ₹5,400 crore.

In March 2022, Vodafone Plc had sold a 4.7% stake in Indus Towers to Bharti Airtel, which was used to clear past dues to Indus Towers via equity infusion into Vodafone Idea.

"A similar equity infusion into Vodafone Idea could help in accelerated clearing of Indus Towers' past dues and could result in a special dividend of ₹15 per share," the JPMorgan note said.

Shares of Indus Towers are trading 1.1% lower at ₹336.90. The stock has risen 66% so far in 2024.

Shares of Vodafone Idea too are trading 1.1% lower at ₹16.56. The stock is down 2.6% so far in 2024.