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 s