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Here's why Bharti Infratel jumped over 22 percent in just 3 sessions

Updated : September 04, 2020 01:35 PM IST

Shares of Bharti Infratel jumped 5 percent on Tuesday after the company's board decided to proceed with its merger with Indus Towers.

Bharti Infratel share price has surged over 22 percent in just 3 sessions after the company got a nod from the board for its merger with Indus Tower, which has already been postponed twice earlier.

The stock today was up as much as 5.4 percent to hit an intra-day high of Rs 230.75 on BSE. Meanwhile, it had settled over 11 percent higher in the previous session.

In a filing, Bharti Infratel said that its Board of Directors, in a meeting held on August 31, discussed the scheme of arrangement with Indus Towers and related agreements, and has decided to proceed with the merger.

“After deliberations, the Board has authorised the chairman to proceed with the scheme and comply with other procedural requirements to complete the merger – including approaching the National Companies Law Tribunal (NCLT) to make the scheme effective subject to certain procedural condition precedents,” the company’s statement added.

According to the filing, Infratel will be a majority shareholder with a stake of around 68.6 percent, while Vodafone will hold a 28.2 percent stake. Meanwhile, Vodafone Idea also decided to cash out by selling its 11.15 percent stake in Indus.

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.

Meanwhile, Deutsche Bank the move will prove a strong source of value-add in the long-term. Establishing a national footprint and a broader shareholder base improves scale and independence will boost its appeal to third party customers Jio and BSNL, it added.

It kept the stock's 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 and it estimates a 10.6 percent EPS gain from the merger. DB also believes that building a bigger tent to attract tenants is the most important element of this merger.

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