Vi vs. Indus Tower: Which Stock to Buy Amid FPO Buzz

Check out which stock to buy amid the FPO buzz between Vi vs. Indus tower

As for Indus Towers and Vodafone Idea, they are right now in the spotlight of available media after the recent FPO (follow-on public offer) news broadcasting. Vi aims to open a fundraising platform where it is most probable to generate $18,000 crore to empower the company's financial spots and network growth. As Indus Towers, one of the leading institutions, is expected to benefit from both Vi's FPO and network increase, series A becomes an ideal asset for long-term investors. However, it must be cautioned that the nisus are taken after proper research and that they are aligned with individual financial targets. It also remains vital to focus on the firms' economic health, where they are located, and what their plans are.

Vodafone Idea FPO: Indus Towers is the largest mobile tower firm in India and, thus, should expect to do well if Vodafone Idea completes its funding of ₹45,000 crore. And its expansion, analysts said.

The country's FPO market gained momentum with the subscription for ₹18,000 crores of Vodafone Idea Limited on April 18, 2022, which was the most significant corporate offer. The income mentioned from the IPO should be utilized for the purchase of equipment for the development of the network infrastructure, which is the sum of ₹12,750 crore. These measures comprise the building of new 4G sites, the improvement of the coverage capacity at both reference and new 4G sites, and the 5G sites setup.

Same as above. Vodafone Idea FPO proceeds will also be used to clear the DoT demands about certain deferred spectrum payments. At the initial offering, Vodafone Idea FPO was brought down to 26%.

Experts forecast that the ₹ 20,000 crore equity infusion capital could be a catalyst for additional equity funds estimated at ₹ 25,000 crore to follow.

According to IIFL Securities, such a deal lets Vodafone Idea scale up capex and bolster its performance in meeting the coverage and capacity challenge vis-à-vis competitors. The brokers expect at least 0.55 trillion capex for the fiscal year from FY25 until fiscal 27, which indicates an increase in subscriber churn.

De-risking Indian operations in terms of a strategic client, which is Vodafone, will be a benefit of the successful fundraising of Vodafone Idea by Indus Tower.

"We calculate that the company should hike up its mobile broadband location from the current ~170,000 to 250,000 over the next two years. We expect Indus to account for almost 80 percent of the increase, which will bring its occupancy ratio to the current 1.95x from 1.7x," assumes IIFL Securities.

Moreover, Atom would benefit Indus from population growth and secure a more extensive customer base for the second tenant on many of its apartments. This impact on the tenancy ratio has a direct influence on unit economics in the Indus tower portfolio.

Vodafone Idea's financials are improving, which has led to a decrease in Indus's provisioning for doubtful debts per year. As a result, our FY25 EBITDA and FY26 EBITDA have increased by 10% and 28%, respectively. With an improvement in working capital, PAT has increased by 16% and 44%, respectively, according to a report by IIFL Securities.

IIFL Securities has upgraded the stock rating of Indus Towers securities to "Buy." They have raised the target share price to ₹379 per Indus Towers share, as the sector will benefit from Vodafone Idea's financial improvement, which will result in more rollouts and the possibility of dividend reinstatement.

Its earlier TP derivation was based on a 75:25 chance that this market will be trichotomy/ dichotomy. However, for the market at this point, there is a 0% probability of a two-player market but a 100% probability of a three-player market. Before anyone has even accounted for any recoveries from Vodafone Idea's owed money worth over ₹6,000 crores is the raised price of Indus Towers shares.

IIFL Securities predicts that Indus Towers will resume dividend payments from FY25 as the company starts to generate healthy free cash flows again. The company's dividend policy is to pay out 100% of its FCF.

IIFL Securities estimates that Indus Towers' FCF generation will be around ₹ 4,000 crore in FY25 and ₹ 6,500 crore in FY26. According to IIFL Securities, Indus Towers' stock is attractive, with a dividend yield of 4.5% in FY25 and 7.2% in FY26. The share price of Indus Towers has risen by more than 4% to a new 52-week high at ₹360.60 per share.

The stock has gained more than 50% in the past month and over 75% in the year to date (YTD), and it has risen more than 155% in the past year in the stock market. At 11:40 a.m., shares of Indus Towers were trading at ₹350.90 per share on the BSE. Meanwhile, Vodafone India shares were trading at 0.30.