Amidst intense speculation about the future of Vodafone Idea (Vi), Parag Thakkar, Senior Fund Manager at Fort Capital, has outlined a strategic, indirect approach to gain exposure to a potential turnaround in the beleaguered telecom operator, favoring an investment in Indus Towers over a direct punt on Vi's stock.
The Rationale for Avoiding a Direct Bet
Thakkar acknowledged that some investors are buying Vi stock directly, betting on a revival that would sustain a competitive three-player telecom market in India. However, his fund is constrained from taking this route due to Vi's challenging financial metrics, specifically its "net debt to EBITDA" ratio, which remains a prohibitive factor for institutional buying discipline. He also noted the stock has retreated after touching the ₹11 level—the price at its recent fundraise.
The Core Thesis: Betting on Government Intent
The foundation of Thakkar's strategy is a belief in the government's intent to save Vodafone Idea. With the government now owning approximately 49% of the company following equity conversion of past dues, Thakkar opined, "the intent will be definitely to save Vodafone." He views a government-backed survival as the most likely outcome.
The Play: Indus Towers as the Primary Beneficiary
Instead of buying Vi, Thakkar's portfolio holds a "large" position in Indus Towers. His logic is straightforward: If Vodafone Idea survives, it remains a major tenant for Indus Towers, ensuring continued rental income and cash flow for the tower infrastructure company. This makes Indus a direct, lower-risk beneficiary of Vi's continued operations.
Additional Bullish Factors for Indus Towers
Thakkar reinforced his thesis on Indus with several supportive points:
- Strategic Interest: Bharti Airtel has been consistently increasing its stake in Indus Towers.
- Leadership Endorsement: He cited Bharti Airtel's CEO, Gopal Vittal, who has publicly stated that "Indus Tower offers a deep value compared to global peers like American Towers."
- Compelling Valuation: On a market cap to cash profit basis, Thakkar finds Indus Towers to be an attractive value proposition.
Portfolio Context
While Reliance Industries remains Fort Capital's top holding, the position in Indus Towers represents a calculated, value-driven bet on the telecom sector's restructuring, specifically tied to the Vodafone Idea survival narrative.
The Bottom Line
Thakkar's approach highlights a sophisticated risk-management strategy prevalent among institutional investors. Rather than taking a binary bet on Vi's highly volatile equity, he identifies a more stable, cash-generating infrastructure play (Indus Towers) whose fortunes are positively correlated with Vi's survival. This strategy seeks to capture the upside of a government-led rescue while insulating the portfolio from the direct financial and operational risks still facing Vodafone Idea. It underscores a broader market view that while Vi's survival is probable, the safer and more rational way to play it is through its key business partners.