Brokerage firm Citi has opened a positive catalyst watch for a 90-day period on shares of Vodafone Idea Ltd. and Indus Towers Ltd. on Tuesday, April 1.

The government will now become the largest shareholder of Vodafone Idea after it will convert its spectrum dues into equity. The equity conversion of ₹36,950 crore, will take the government’s total shareholding in Vodafone Idea to 48.99%.

Citi has called this move a material development that will have significant positive implications. The brokerage also said that this is a major display of support by the government in a very timely manner.

The government’s move should provide significant relief to Vodafone Idea’s cash flow in the next three years and help it complete its bank debt raise, the Citi note said. Vodafone Idea has raised over ₹20,000 crore through its largest Follow-on Public Offer (FPO) last year and infusion of funds by promoters.

“Meanwhile, we also believe it will lift concerns on tariff companies like Indus Towers,” Citi said, adding that it has opened a 90-day positive catalyst watch.

Citi has a price target of ₹12 on Vodafone Idea, which implies a potential upside of 77% from Friday’s closing levels.

The brokerage has also opened a 90-day positive catalyst watch on Indus Towers, saying that it expects the resumption of dividend payouts and expects a ₹18 per share payout by April.

Citi’s positive stance on Indus Towers is also based on firm progress by Vodafone Idea on the completion of its debt raise.

“On our FY25-27E forecasts, we expect Indus Towers to deliver a core EBITDA CAGR of 10% excluding writebacks, underpinned by a tenancy CAGR of 8%,” Citi said.

Indus Towers’ implied dividend yield of 5% to 7% presents a compelling investment opportunity, according to Citi’s note.

Citi has a price target of ₹470 on Indus Towers, which implies a potential upside of 41% from Friday’s closing levels.

Also Read: Vodafone Idea Share Price: What lies ahead for its 58 lakh small shareholders