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ICICI Securities
Target: ₹245
CMP: ₹181.70
At CMP, Bharti Infratel provides a huge margin of safety and an opportunity to earn dividend of ₹17.8 per share. This means the effective price of buying Bharti Infratel is ₹160 per share.
Our working shows, in the worst case of a Vodafone Idea Ltd shut down, the fair value of Bharti Infratel dips to ₹130-150 per share.
However, the probability of VIL shutting down has been reducing with staggered AGR payment and the company’s efforts to raise fresh capital.
Further, any tariff hike, which is imminent, will increase confidence among investors. The situation for VIL is much better now than a few months back. Further, as part of the merger (Bharti Infratel-Indus Towers), VIL is making advance payment of ₹2,600 crore towards MSA (rental), and Vodafone Plc has pledged its holding in the proposed merged entity worth ₹8,250 crore (17 per cent of post-merger market cap at CMP), which provides safety for 12 months’ rental.
We believe 5G will open up new business opportunities such as higher core rentals, and small cell and fibre business.
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