Airtel to buy incremental stake in Indus Towers from Vodafone PLC

News: Bharti Airtel has signed an agreement to buy Vodafone PLC's 4.7% stake in Indus Towers on the condition that the proceeds will be used for investment in Vodafone Idea and clearing its dues towards Indus Towers. In addition, Airtel is protected with a capped price, which is lower than the price for the block of Indus shares sold by Vodafone (Rs.226.8/share).

Views: The money will largely be remitted to VIL to repay Indus, which, in turn, will pay out dividends, a major portion of which will accrue to Airtel. Thus, effective cost may be lower. However, accretion of stake in Indus, where growth challenges persist, is not optimal capital allocation, prima facie, in our view.

Impact: Neutral