INDUSTOWER - INDUS TOWERS LIMITED Share Price

Outlook by Management:
Indus Towers anticipates continued growth driven by robust demand from a major customer, particularly in rural areas, and accelerated 5G rollouts. Management expects 5G-related loading revenues to gradually increase, supplemented by new site demand as penetration grows. The Telecommunications Bill (2023) is seen as a positive regulatory catalyst, enhancing network security and easing Right-of-Way (RoW) challenges. Rural expansions and 5G deployments are projected to sustain near-term growth.

Key Highlights:

1. Operational Performance:

   • Record tower additions (7,563 macro towers; 7,217 co-locations) driven by a major customer's rural rollout.
   • Tenancy ratio at 1.70; leaner tower co-locations hit 9,994 (highest in four quarters).

2. Financials:

   • Revenue grew 6.4% YoY to Rs.72B; core rental revenue up 7.3% YoY.
   • EBITDA surged 2x YoY to Rs.36.2B, with margins at 50.3%. Improved collections reduced trade receivables by Rs.1.7B.

3. Strategic Priorities:

   • Market Share: Aggressive expansion to capture demand, leveraging digital tools and partner ecosystems.
   • Cost Efficiency: Reduced diesel consumption by 7% YoY via renewables and electrification; added 3,300+ solar sites in Q3.
   • Network Uptime: Achieved 99.97% uptime despite adverse weather.

4. ESG Progress:

   • GHG reduction via solar adoption (6,665 sites vs. 1,496 in early 2023).
   • Gender diversity improved to 11.3% (from 6.3%).

5. Regulatory & Industry Trends:

   • 5G subscriptions in India projected to reach 860M by 2029.
   • Data consumption growth (23% YoY) to drive passive infrastructure demand.

Challenges: Elevated capex (Rs.26.5B in Q3) due to tower additions, though viewed as long-term value drivers. Provisions for past dues and entry tax adjustments impacted financials, but collections improved (Rs.3B against overdue).

Conclusion: Management remains confident in sustaining growth through market leadership, operational excellence, and regulatory tailwinds. Focus on 5G, rural expansion, and cost optimization underpins the positive outlook.

What is the status of tower fiberization, and have we achieved 100% coverage?
Current tower fiberization in India is around 30"“35%, with one operator at a higher level. Fiberization needs to reach 80"“90% for optimal 5G experience, driven by operators. Indus does not directly handle fiberization but anticipates growth as operators expand.

Given Jio's higher subscriber additions, is demand growing more from Jio or Airtel?
Indus refrained from commenting on operator-specific subscriber trends, focusing instead on executing its order book. Growth is driven by a major customer (likely Airtel) rolling out rural sites.

Will Indus explore digital infrastructure like data centers if tower demand slows?
Indus is evaluating complementary infrastructure opportunities but emphasized current focus on passive telecom infrastructure. No immediate plans were shared for data centers or enterprise 5G.

How are overdue receivables treated, and what levers exist for recovery beyond restricting access?
Collections follow FIFO, reducing old dues and reversing provisions. Indus engages the customer to clear past dues but did not disclose specific recovery levers beyond ongoing negotiations.

Why aren't 5G loading revenues reflecting in financials?
5G loading contributes 5"“10% incremental revenue per site, offset by lease accounting adjustments and renewal discounts. Renewals of 50"“60% of the portfolio in future years may further impact growth.

How does Indus compete in leaner towers against agile regional players?
Leaner tower execution and uptime differentiate Indus. Modular designs allow cost-efficient co-location. The company claims competitive agility and geographic reach, with leaner sites largely single-tenant but expandable.

Will peak capex in FY24 lead to slower tenancy growth post-2024?
Indus expects strong order book execution for 2"“3 quarters. Long-term growth will depend on 5G loading and rural expansion, with no immediate moderation foreseen.

What is the dividend outlook given improved collections and free cash flow?
Dividend policy remains tied to annual free cash flow, factoring in elevated capex. Collections and overdue recovery may aid FY24 cash flow, but decisions await year-end review.

Why is tenancy ratio declining, and what is the sustainable level?
Decline stems from single-tenant rural tower additions for a major customer. Existing portfolio tenancy remains stable. Long-term ratio depends on rollout mix but may stay lower due to rural focus.

How does Starlink's entry impact Indus?
Satellite services like Starlink are seen as complementary for remote areas, not a threat. Tower demand remains tied to terrestrial network expansion and 5G.