Indus Tower shares drop 13% following Supreme Court’s rejection of AGR case re-computation

Shares of Indus Towers dropped by 13 per cent on Thursday, hitting a low of ₹366.30 on the BSE, following the Supreme Court's ruling in the Adjusted Gross Revenue (AGR) case, which denied telecom companies' request for a re-computation.

The Supreme Court upheld its previous decision on the AGR issue, insisting that telecom companies pay the full amount of the AGR dues.

Last year, Airtel and Vi had appealed to the Supreme Court to reconsider an earlier ruling, which had rejected their claims of arithmetical errors in the Department of Telecommunications' (DoT) calculation of AGR dues, seeking a hearing in open court for their curative petitions.

In 2019, the Supreme Court upheld the Department of Telecom's AGR demand against Vi, imposing a financial burden of ₹58,000 crore. With added interest, this amount has risen to ₹70,320 crore by the end of FY24.

Analyst view on Indus Tower stock

Earlier this month, global brokerage firm Goldman Sachs downgraded Indus Towers from a 'Neutral' rating to 'Sell,' lowering the target price to ₹220. The firm also set a target price of just ₹2.5 for Vi, indicating a potential downside of up to 83%.

Commenting on Indus Towers, the global brokerage firm noted a disconnect between the company’s fundamentals and its current valuations. It believes the recent re-rating of Indus is overdone, with limited clarity on the company’s medium- to long-term growth prospects.

The firm also mentioned that it would adopt a more positive outlook on Indus Towers if Vodafone Idea successfully strengthens its balance sheet.

IIFL Securities suggests that Vodafone Idea's cash flow challenges are likely to intensify without court intervention. The rejection of the curative petition, however, offers a modestly positive outlook for Bharti Airtel, particularly regarding potential market share growth.

Over the past year, Indus Towers' shares have risen by 108 per cent, with a nearly 90 per cent increase year-to-date.

On August 28, 2024, the board of Indus Towers approved a buyback of 5.67 crore shares, which will raise Bharti Airtel's stake in the company to over 50 percent, effectively making Indus Towers a subsidiary of Bharti Airtel.