It also downgraded Indus Towers to “sell” but increased its 12-month price target to Rs 350 from Rs 220. Following VIL’s Rs 18,000-crore fundraise in April, the fundamental prospects for the tower company saw a marked improvement, which led to a re-rating in the stock. Goldman, however, believes Indus’ re-rating is “overdone”. “Indus’ current share price implies a sustained 8-10 per cent Ebitda growth at least until FY30, which we see as unlikely (we expect a moderation starting FY27). Additionally, the market seems to be pricing in upside to telcos’ capex/free-cash flow from any potential reduction in Adjusted Gross Revenue (AGR) dues, as well as potential upside to Indus from the reported merger with Airtel’s data centre business, both of which we see as premature,” it said.

Goldman has assigned a multiple of 9x on Indus’ projected 12-month forward EV/Ebitda (18x forward P/E). The stock currently trades at a 15 per cent discount from its 2015-18 average multiple, but 70 per cent higher than the stock’s last three-year average multiple, the brokerage noted.

VIL shares saw the maximum plunge of 11 per cent as Goldman assigned a base case target of Rs 2.5. It said the company’s recent fundraise is positive but may not be adequate to stem its market share erosion. The brokerage said as the capex spends of its peers could be at least 50 per cent higher, VIL could lose another 300 basis points (bps) market share over the next three-four years. It said VIL’s net debt-to-Ebitda could remain elevated at 19x by March 2025, which could put pressure on its balance sheet.

The brokerage, however, also assigned a “blue-sky scenario” price target of Rs 19, “where we assume 65 per cent lower AGR dues, consistent tariff increases and no near-term government repayments”.

Rival Bharti Airtel, on the other hand, earned accolades from Goldman, which saw its stock decline just 0.5 per cent even as the benchmark Sensex fell 1.24 per cent.

“Bharti Airtel’s execution in recent periods has been solid — wireless revenues have been consistently growing faster than that of peers, with the company gaining 250 bps of revenue market share in the last two years,” it said.

Goldman expects these tailwinds to sustain. It has raised Airtel’s FY25-30 Ebitda estimates for Bharti (India) by up to 32 per cent (consolidated Ebitda increase by up to 20 per cent).

While reiterating “buy”, it has increased the price target for the stock to Rs 1,700 from Rs 990 earlier, implying a 10 per cent upside from current levels.

First Published: Sep 06 2024 | 6:17 PM IST