The Council of Ministers has authorised the state to hike its stake in Indra (IDR) through SEPI. It will increase its control from the current 18.7% to 28%. “The motive behind the government’s reasoning is greater control in a key company for the country’s defence system”, says Renta 4.
At current prices, the increase in its stake would mean an investment of just over 150 million euros. According to press reports, the government will propose the appointment of two additional directors.
Renta 4’s assessment:
“Although we believe that the government’s greater control could translate into new contracts (mainly in Defence), we have a negative view of the news from a “governance” point of view.
This operation would result in greater control of Indra’s board by the government, which already in May 2021 led to the fall of the then CEO, Fernando Abril-Martorell. In our opinion, the management of the company has also been very positive under the leadership of Ignacio Mataix and Cristina Ruiz, who have led the firm since then.
We consider that more control by directors coming from the government is negative, as in our view it could lead to a turnaround in Indra’s strategy. In our mind is the government’s interest in the company’s participation in a consortium to enter the capital of ITP Aero, an entity we believe would not add value to Indra. Negative news. Target Price 12.5 euros/share. Overweight”.
