Indus Tower Shares Experience Significant Decline
Indus Towers shares experienced a steep decline on Thursday, September 19, with the stock price plummeting by 14%. This sharp drop marks the most significant fall since June 4, as shares hit the lower circuit limit of Rs 384.80 on the Bombay Stock Exchange (BSE). The steep decline in stock value was largely attributed to a recent Supreme Court ruling that was unfavorable for telecom companies in the ongoing Adjusted Gross Revenue (AGR) case.
Impact of Supreme Court Ruling
The Supreme Court’s decision upheld previous AGR calculations, dismissing claims from telecom companies regarding errors in assessing their dues. As a result, Vodafone Idea’s outstanding AGR dues have surged to approximately Rs 70,300 crore. This ruling casts a shadow over Vodafone Idea’s cash flow, creating ripple effects that are significantly impacting Indus Towers, a company heavily dependent on telecom operators for its revenue.
Market Reactions and Analyst Ratings
In a contrasting market response, JPMorgan recently upgraded its rating on Indus Towers from ‘Neutral’ to ‘Overweight’, while also boosting its target price from Rs 340 to Rs 500. Analysts at JPMorgan believe that increased capital expenditure and tower tenancies from Vodafone Idea are likely to enhance Indus Towers’ revenue and operating profit (EBITDA), projecting double-digit growth during the fiscal years 2025-2027.
Financial Recovery Prospects for Vodafone Idea
According to JPMorgan, Vodafone Idea’s financial situation is showing signs of improvement, as the outstanding dues have reportedly reduced to Rs 4,600 crore. Analysts expressed optimism regarding the recovery of these remaining dues, which could potentially facilitate regular dividend payments from Indus Towers starting from fiscal year 2026.
Contrasting Views from Goldman Sachs
On the flip side, Goldman Sachs downgraded Indus Towers’ stock rating from ‘Neutral’ to ‘Sell’, arguing that the company’s current stock rating is inflated and that consistent EBITDA growth of 8% to 10% is unlikely to materialize. Analysts at Goldman Sachs caution that market expectations surrounding Vodafone Idea’s reduced AGR dues and increased capital expenditure could be premature, reflecting a cautious approach to the stock’s potential recovery.
Current Stock Performance
As of now, Indus Towers shares are trading at about Rs 384.80. Despite the current downturn, the stock has witnessed a remarkable increase of 90% year-to-date. However, it is important to note that the stock is now down 16% from its all-time high of Rs 460, highlighting the volatility and challenges facing the telecom sector.
Conclusion
The recent Supreme Court ruling has introduced new uncertainties in the telecom landscape, affecting both Vodafone Idea and its partners such as Indus Towers. While some analysts remain optimistic about future recovery, others advise caution, creating a complex environment for investors. Stakeholders will need to closely monitor developments in the AGR case and company performance as the fiscal landscape evolves.
