Bharti Infratels stock dipped by over 1% on a day it announced a merger with Indus Towers, with market watchers saying that the deal was largely priced in. The tower companys parent, Bharti Airtel, though saw its shares rise over 3%, after it said it was evaluating a stake sale in the combined tower entity. The telecom market leaders shares also received a boost with investors believing that its financials had hit the bottom with the loss in India business reported a day earlier.
Sanjiv Bhasin, executive VP-markets and corporate affairs at IIFL, said that the Indus Towers-Bharti Infratel, despite being a win-win for all stakeholders, was largely priced in. “We have the derivative expiry tomorrow, maybe there was some heaviness on the derivative side which got unbound. But these are everyday movements.”
Brokerage houses and analysts further said that retail investors, that hold a tiny portion of the shares in Bharti Infratel, would not have been able to influence the price of the stock due to very limited liquidity and institutional and financial investors see the merger between Bharti Infratel and Indus Towers as simply status quo till new investors come in.
“Public shareholding in Bharti Infratel is right now 0.5%, 46% is held by institutional investors. So once Bharti Airtel will be keen to exit from the merged entity, that is when institutional investors – who want to buy more even now – will buy,” said market expert SP Tulsian, thus influencing the stock price. Public shareholding in Bharti Infratel is presently at 46.5%, the rest with promoters.
Induss merger into Infratel is expected to close by March 2019. Airtel said it may sell stake to potential private equity players post the deal closure. The combined entity, called Indus Towers, will continue to be listed on Indian bourses. Bharti Airtel and Vodafone India will have joint control in the entity.
Telecom and media consultancy firm Capitel added that the stock movement of Bharti Infratel reflected the continued non-visibility on total churn of tenancies from the Idea Cellular-Vodafone India merger, besides other weaker operators who were exiting the market. “Only when there is some confirmed indication from potential private equity investors for buyout would there be a (positive) effect on Infratel stock… right now, its only a merger,” said Pankaj Agrawal, partner at the firm.
Infratel shares closed 1.1% lower at Rs325.90 on the BSE, Wednesday. Airtel, in contrast, ended 3.4% higher at Rs 325.90, despite reporting the first loss in 15 years in its India business on Tuesday.
Reports from several brokerage houses said that Bharti Airtels Rs 83 crore net profit on a consolidated basis for the quarter ended March 2018 were better with their beaten down expectations of a net loss. They added that the Sunil Mittal owned-carrier remained well positioned to benefit from the imminent turnaround of the Indian telecom industry that has been battered with fall in revenues, profits due to hyper competition and free voice and data offers from new entrant Reliance Jio.
Bhartis numbers were already discounted as it was not as bad as it was expected and now theres expectation that average revenue per user (ARPU) may have bottomed out, IIFLs Bhasin said.
Bharti Airtel will benefit from the unlocking of value in Infratel, and it will also help them in getting better deal as they will be able to get easier borrowings on the balance sheet because of reduction in debt equity ratio, he added.