Bharti Infratel's shares surge 5% post positive brokerage calls on Indus Towers merger

Updated : September 02, 2020 01:20 PM IST

The shares rose as much as 5 percent to Rs 197.50 per share on the NSE.

Post merger announcement, brokerages feel there's value in the Bharti Infratel.

Bharti Infratel's shares surged nearly 5 percent on Wednesday after the company approved the long-pending merger with Indus Towers. Brokerages feel that this merger will add value in the future, and have maintained positive call on the stock. The shares rose as much as 5 percent to Rs 197.50 per share on the NSE.

In a statement, Bharti Airtel said that Vodafone Idea will be able to divest an 11.15 percent stake in Indus Towers for Rs 4,000 crore. The transaction is subject to the approval of the National Company Law Tribunal (NCLT).

Post the merger announcement, brokerages feel there's value in the Bharti Infratel. UBS maintains a 'neutral' call on Bharti Infratel with a target price at Rs 188 per share as it believes the risk-reward is balanced here.

On Vodafone Idea's front, the brokerage said that the outlook remains uncertain. "We give a target of Rs 110/share if Vodafone exits the market, Rs 190/share if it stays partially in the market and Rs 220/share assuming it continues to remain in the market."

Deutsche Bank kept its target price on the stock at Rs 250/share, with a 'buy' call due to the current risk adjusted value.

According to the brokerage, the merger will prove a strong source of value-addition in the long term. "Estimate a 10.6 percent EPS gain from merging. The national footprint and broader shareholder base improve scale and independence," the report said.

Bharti Airtel's shareholding drops from 54 percent to around 37 percent, while the rest is split fairly evenly between minorities and Vodafone PLC/PEP. We believe building a bigger tent to attract tenants is the most important element of this merger, as we estimate the synergies are not particularly large, explained the brokerage.

For more stock updates, follow our live blog