Airtel ups stake in 'undervalued' Indus Towers. Should you?

Summary: Bharti Airtel is picking up an additional 5 per cent stake in subsidiary Indus Towers, describing it as “undervalued”. Is this a sign for investors to follow? Read on to find out.

Bharti Airtel is doubling down on India’s largest telecom infrastructure provider and subsidiary Indus Towers. Earlier this week, the promoter, which already owns a controlling 51 per cent stake in Indus, said it will raise its stake by up to 5 per cent over time, describing Indus as a “clearly undervalued asset” with strong dividend-paying potential.

That statement has drawn investor interest. After all, when a promoter calls its business undervalued and backs it up with a stake increase, it sounds like a vote of confidence. But does the label hold up to scrutiny?

A low P/E, but does it signal value or risk?

At roughly 11 times earnings, Indus Towers looks like a bargain compared with many infrastructure peers. The company runs over 2.3 lakh towers and 3.8 lakh co-locations, renting them to India’s three major telecom operators—Airtel, Reliance Jio and Vodafone Idea (Vi). With rental contracts spanning years and minimal incremental capital expenditure needs, it looks like a steady, capital-efficient business.

However, the one overhang that has shadowed Indus for years is still present—its exposure to Vodafone Idea, the financially fragile client, which makes up nearly 40 per cent of the business.

For years, Indus’ cash flow has been hostage to Vi’s delayed payments. Although the company has recovered a significant chunk of past dues, lingering uncertainty around Vi’s adjusted gross revenue (AGR) liabilities continues to cloud its books. If Vi’s finances worsen, delayed payments or a collapse could put a significant part of Indus’ revenues at risk.

The company’s management has admitted that these concerns have restricted dividend payouts, despite ample cash flow.

The latest September saw Indus’ net profit falling 17 per cent year-on-year, even as revenue rose 9.7 per cent, dragged by adjustments related to Vi’s overdue payments. Net margins slid to 22 per cent from 29 per cent a year earlier, while Rs 4,852 crore worth of receivables still sit on the books—lower than in March 2025, but still sizeable.

In short, Indus’ apparently cheap valuation reflects not investor neglect but investor caution. Until there’s clarity on Vi’s survival, a sustained re-rating remains unlikely.

Airtel’s stake increase: strategic, not necessarily opportunistic

From Airtel’s standpoint, increasing its stake in Indus makes strategic sense. The tower network is critical to its connectivity backbone. A larger ownership ensures greater control over a core infrastructure asset, allowing it to secure network reliability and reduce dependence on third parties.

But from a market investor’s lens, Indus’ valuation captures the operational risks. Investors must also note the shrinking industry opportunity. With telecom penetration at around 85 per cent, organic tower growth is limited. Even the pace of 5G rollouts—once seen as a growth kicker—has moderated.

Searching for new growth poles

To offset slowing domestic momentum, Indus is looking beyond its traditional business. The company plans to expand into Africa, initially in Nigeria, Uganda and Zambia, banking on its operational expertise and Airtel Africa’s strong presence as an anchor tenant.

Simultaneously, it is exploring EV charging infrastructure, using its nationwide tower footprint as a ready-made grid for chargers.

These are logical moves for diversification—but both are still at a formative stage. There’s little visibility yet on financial impact, timelines or returns. For now, Indus’ fortunes remain closely tied to the recovery of India’s telecom ecosystem—and to Vi’s survival in particular.

The bottom line

Indus Towers remains a formidable infrastructure franchise, but the market’s scepticism shows up in its valuation. The low P/E isn’t so much a case of overlooked value as it is a reflection of lingering risks.

Airtel may see long-term strategic value in Indus, given the operational linkages and the control it brings. For investors, though, it’s a stock that demands patience. Its story still hinges on how the company navigates its biggest dependency and whether its new growth bets can meaningfully offset it.

Which infrastructure plays actually deserve your money?

The infrastructure story in India is gathering steam—towers, power, roads, renewables. But as Indus Towers shows, not every player tagged as “undervalued” truly is. Behind the headline numbers often lie balance sheets stretched thin, fragile cash flows, and businesses hostage to a single customer or regulator.

That’s why separating promise from performance matters. At Value Research Stock Advisor, we don’t chase what’s merely cheap—we identify companies with real earning power, clean finances and lasting competitive edges. The kind that can weather business cycles and still compound your wealth.

So, join us and find which ones truly deserve your money.

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Also read: A small cap both Ashish Kacholia, Mukul Agrawal bought in Q2