US-based asset management firm Providence Equity Partners is likely to join Vodafone Idea in selling their stakes in Indus Towers for roughly Rs 2,000 crore and Rs 5,500 crore, respectively, before the tower companys merger with Bharti Infratel, people aware of the matter said.Under the terms of the merger, Providence, which owns 4.85 per cent in Indus Towers, can monetise a 3.35 per cent stake and get a 1.1 per cent stake in the combined tower entity for the remaining 1.5 per cent.
Providence is likely to eventually sell these shares, too, and fully exit the merged entity, one person told ET.Vodafone Idea has the option to sell its entire 11.15 per cent stake in Indus for cash, based on a formula linked to trading performance of Bharti Infratels shares during the 60 trading days prior to the Indus-Infratel merger closure.
A Vodafone Idea spokesman told ET that based on current facts, the company would like to take cash, although it retained the option to take cash or shares, and a final decision would be taken closer to the Indus-Infratel merger based on facts at that time.At press time Providence, Bharti Infratel and Indus Towers did not reply to ETs queries.
Bharti Infratel shares rose 0.4 per cent to Rs 272.15 at the close on the BSE on Friday.Analysts said its a given that loss-making Vodafone Idea would cash out to garner funds to step up 4G network spends and compete with Reliance Jio Infocomm.Earlier this week, Bharti Infratel chairman Akhil Gupta said the listed tower companys merger with Indus would be completed in the next few months.
The National Company Law Tribunal is likely to consider the Bharti Infratel-Indus merger at a scheduled hearing on May 14.Analysts said if Providence and Vodafone Idea exercise their cash exit options, it could increase the leverage ratio (net debt to Ebitda) of the merged entity.Bharti Infratels management confirmed that net debt/Ebitda will likely increase after the merger with both Idea and Providence taking the cash exit option, but will remain lightly leveraged in the short-term, Sanford C Bernstein said in a note seen by ET.Bharti Infra and Vodafone, the two other investors in Indus Towers holding 42 per cent each, will jointly control the merged tower company as equal shareholders with equal board representation.
The size of Bharti Airtel and Vodafones stakes in the entity will hinge on Vodafone Idea and Providences decisions to cash out.