Indus Towers sees upside from SC relief to Vi; eyes Africa foray in 6 months

A lifeline may finally be on the horizon for India’s debt-laden telecom sector. Bharti Airtel’s tower arm Indus Towers on Tuesday welcomed the Supreme Court’s decision allowing the government to reassess adjusted gross revenue (AGR) dues; Analysts say this move could ease the burden on major customer Vodafone Idea and in addition improve its own risk outlook and valuation and support the overall prospects of the industry.

Prachur Sah, managing director and chief executive officer of Indus Towers, described the development as a “good sign for the industry” while reiterating that decisions on dividend payments were planned for the March quarter. Many brokerages said the decision could strengthen Vodafone Idea’s chances of survival and narrow the valuation gap with Indus Towers’ global peers.

“Overall, it has been a good development for the industry. We welcome this support. Once clarity emerges, it will help us make the right decisions (on cash returns for shareholders),” Sah said in a post-earnings call with analysts. “The board will consider distributing the money to shareholders and is committed to doing so, and the timing (for the review) remains the end of the fiscal year in Q4. We will keep you informed if anything changes.”

In particular, financial stability concerns surrounding its main customer Vodafone Idea were one of the reasons why Indus Towers suspended the return of cash to its shareholders. This is because if Vodafone Idea does not get any help from the government, the company will not be able to continue its existence and hence, it will also negatively affect the business of Indus Towers.

On Monday, the apex court allowed the government to resolve the beleaguered telecom operator’s complaints without court intervention and reconsider its demand for AGR dues. The court observed that there was no impediment for the government to reconsider the matter and take the appropriate decision in law, clarifying that the matter was within the policy purview of the government.

Vodafone Idea had filed a petition last month objecting to the telecom department’s demand for additional charges. ₹9,450 crore in AGR dues. The company also requested a waiver of interest and penalties, claiming that the disputed parts of the dues have not yet been finalized. The Supreme Court’s decision now paves the way for the struggling telecom operator to receive much-needed financial relief, easing concerns about the company’s survival.

“We believe this (the court decision) could have significant positive consequences for Vodafone Idea and, by extension, Indus Towers,” analysts at brokerage Citi said in an Oct. 27 note. “Given the imminent arrival of a large lump sum towards AGR dues by Vi (Vodafone Idea) to be paid to the government in March 2026, we believe that assistance from the government should arrive well before this deadline, i.e. in the coming weeks and months.”

Of course, Vodafone Idea pays an amount equivalent to monthly billing to Indus Towers. The company’s trade receivables as of the end of September ₹compared to 4,851.5 crore ₹4,361 crore in the previous quarter and ₹5,629 crore in the same period of the previous year.

Despite paying Vodafone Idea’s additional dues ₹There was a sale of ₹ 210 crore to Indus Towers in the quarter, while the company’s trade receivables increased sequentially. The management attributed the increase in receivables to the timing gap in collections and expects the same to normalize in the current quarter.

Analysts at Emkay Global said, “We note that Indus Towers is trading at a discount to its global peers due to concerns over the long-term sustainability of Vi, one of its major customers. The SC decision allows it (the government) to formulate a plan for the long-term sustainability of the company, thereby increasing Vi’s (Vodafone Idea) chances of survival. However, Indus Towers is trading at a discount against its global peers.” “We expect the valuation discount to narrow,” he said. 27 October.

African expansion

Separately, Indus Towers detailed plans to expand into Africa. Last month, the company announced that it would expand its footprint in African markets, starting with Nigeria, Uganda and Zambia.

“From now on, we are targeting anywhere from 3 to 6 months (for the African foray),” Shah said, adding that some administrative issues such as licensing were also in the process.

To start with, Indus Towers is considering investing in Bharti Airtel’s African arm as its main customer in the market. The company said the foray into Africa will initially focus on organic growth, where they will build new towers for Airtel and understand the local market.

“We will enter this market with a capability that will make a difference in how we can reduce the cost per tower, improve uptime and manage energy better. This will be our added value to be more competitive in these markets,” Shah said.

At full scale, Indus Towers’ capital expenditure in Africa could reach $200-300 million, with the organization’s capital structure planned as a balanced mix of debt and equity, management said during the call.

But Indus Towers will consider major scaling decisions later, which could include inorganic expansion.

Quarterly show

In the July-September period, Indus Towers reported a 9.7% year-on-year increase in operating income. ₹8,188 crore. However, net profit fell by 17.3 percent ₹1,839 crore due to high energy and power expenses such as increased diesel consumption. Additionally, lower write-offs of the allowance for doubtful receivables related to collections from a large customer (Vodafone Idea) compared to the previous year period also affected profit in the quarter.

The company added 4,301 towers respectively and 26,416 towers compared to previous years, increasing the number of towers to 256,074 as of the end of September. Colocation areas were at 415,717 compared to 411,212 in the previous quarter. Co-locations or tenancies refer to how many telecom operators use a single tower. A single tower can accommodate equipment from multiple mobile operators; each is considered a co-location.

Indus Towers’ portfolio tenancy ratio or average sharing factor stood at 1.62 during the quarter. This is an important metric that shows the average number of tenants per tower.