Indus Towers flags delays, cost pressures as LPG supply tightens amid West Asia conflict

NEW DELHI: Bharti Airtel subsidiary Indus Towers on Friday flagged supply risks from the West Asian conflict as disruptions in liquefied petroleum gas (LPG), a key production input, threatened to slow tower production, delay rollouts and increase costs.

“There is a strong order book going forward and for the next few quarters. However, considering the situation, I think there is some tightness in the market in terms of tower supply because it depends on LPG availability,” said Prachur Sah, managing director and chief executive officer of the company. “We continue to monitor the situation closely and mitigating measures are being taken in line with evolving geopolitical and market conditions.”

LPG is an important input in tower manufacturing; It is used to heat steel parts so that they can be coated with zinc to prevent rust and extend tower life. Any disruption in LPG supply could slow down production and therefore delay network rollout.

Mobile towers also rely on diesel-based generator sets during power outages. Tower companies supply diesel at retail prices and any increase could increase operating costs. However, these costs are largely passed on to telecom operators such as Airtel, Jio and Vodafone Idea.

“If the retail price (of diesel) has an impact, it will affect both revenue and cost equally. Net margin may have a slight impact. But the real impact will come from revenue and cost only on an equal basis,” Shah said.

Fuel and energy expenses for Indus Towers ₹11,996 crore in FY26, accounting for 37% of the annual revenue from the company’s operations. ₹32,493 crore.

In the December quarter, the company’s revenue from operations increased by 4.8% year-on-year. ₹8,101 crore and remained constant respectively. Net profit realized so far ₹1,793 crore, up 0.8% year on year.

The company added 4,892 towers respectively and 15,209 on an annual basis, increasing its total number to 264,514 as of the end of March. Co-location sites stood at 428,014. A single tower can accommodate equipment for multiple operators, each of which counts as a co-location. Portfolio tenancy ratio, or average tenants per tower, was 1.62 during the quarter.

“We remain below consensus for Indus Towers and continue to see risk of Jio moving tenancies to Altius (Summit Digitel, ATC combination),” brokerage firm Macquarie said in a Feb. 17 note.

“We still see only modest growth (5% revenue CAGR over FY25-28) driven by the slower pace of lease additions (moderation of the strong tower expansion phase in FY24-26) and the impact of no meaningful turnaround in tenancy rate even assuming new sites for Vodafone Idea (note that refarming and top-up have not improved the tenancy rate),” the brokerage said.

When asked about Jio renewing its tower portfolio, Sah said, “We always have a non-renewable portfolio for all our customers and we work with them and they renew. Even for Jio, there are some leases that have expired that are still in operation…very small percentages have been cancelled.”

Vodafone Idea

Indus Towers counts Vodafone Idea as one of its largest customers. “The gradual improvement in the financial situation of a major customer, driven by government support, provides the opportunity for strong business momentum,” Sah said.

The company’s trade receivables as of the end of March ₹4,939 crore. Vodafone Idea accounts for a significant portion of receivables and unbilled revenues, according to the company’s financial statements.

African expansion

Indus Towers also outlined progress on expansion into Africa. “We have received the operating license in Zambia and are currently progressing with onshore implementation. We are in the final stages of obtaining regulatory approvals in Uganda and Nigeria,” Sah said, adding that the rollout of the tower would begin soon.

“Commercial frameworks have largely been established with primary customers and initial orders are available. In parallel, we have made good progress in establishing the supply chain ecosystem, empowering operational engineers, positioning ourselves well for efficient and scalable distribution,” he said.

Management had said in October last year that capital expenditure for full-scale Indus Towers in Africa could reach $200-300 million, with the organization’s capital structure planned as a balanced mix of debt and equity.