Talks between CDPQ and Vodafone over selling a stake in Indus Towers

19 Aug 2022 , 11:27 AM

According to several news reports, the Canadian pension fund Caisse de depot et placement du Quebec (CDPQ) is in talks with Vodafone Plc to purchase the remaining 21% interest the UK telecom firm owns in Indus Towers, India’s largest mobile tower installation company.

Since the share sale process has been reactivated in recent weeks, both parties have held management meetings, and formal due diligence is now anticipated to begin.

According to news reports, the conversations are still in an early stage and there is no assurance that they will result in a transaction.

Based on Thursday’s market capitalization for the tower company of Rs53,669.67 crore, Vodafone’s 21% stake in Indus is valued at around Rs11,270 crore at current market prices. At 199.15, the shares closed the day unchanged. It is the responsibility of JP Morgan and Citi to locate potential buyers for the Vodafone stake.

Speaking with long-term infrastructure investors like Brookfield as well as other sovereign wealth and pension funds was also noted in the report, but those discussions ended in a deadlock.

Vodafone would no longer be involved in India’s passive telecom infrastructure market if it sold its remaining investment in Indus. Additionally, it would be the largest transaction for the Canadian pension fund, which has made significant bets on power companies and toll roads in India, among other things.

The tower company reported a 66.3% year-over-year decline in its June quarter net profit to Rs477.3 crore earlier this month, partly due to high receivables from a significant customer who analysts claimed was Vi, who was short on cash.

As part of its attempts to collect all available money prior to the 5G spectrum sale, Vi recently received an additional Rs436.21 crore from Vodafone Plc through a preferential issue of convertible warrants.

With a stake in Indus of about 48%, Bharti Airtel is the company’s largest shareholder. If Vodafone UK decides to sell its 21% ownership in the telecom tower company to an outside investor, it will have the right of first refusal. After Bharti Infratel and Indus Towers amalgamated at the end of 2020, the US PE fund KKR and the Canadian pension fund CPPIB ended up owning a combined 2.17% and 4.85% of the combined business.