Indus Towers Ltd – Connecting Lives Throughout the Nation

Indus Towers Ltd., shaped via the merger of Indus Towers and Bharti Infratel, is among the largest telecom tower firms globally. Established in 2006 and headquartered in Gurugram, the corporate offers tower and associated infrastructure-sharing providers, managing the deployment, possession, and operation of passive infrastructure for telecom networks. As of December 31, 2024, Indus Towers operates over 234,643 macro towers and 386,819 macro co-locations, with a presence throughout all 22 telecom circles in India. Its consumer base consists of {industry} giants resembling Bharti Airtel (together with Bharti Hexacom), Vodafone Concept Restricted (VIL), and Reliance Jio Infocomm Restricted.

Merchandise and Providers

The corporate’s services are centered round 3 core parts:

• Tower – For mounting the operator antennae at an acceptable peak, encompassing a variety of designs from ground-based towers and rooftop towers to hybrid poles and monopoles.
• Energy – For offering uninterrupted power provide to telecom gear together with greener power options.
• House – Collaboration with residential and business property homeowners for housing telecom and energy gear.

Subsidiaries: As of FY24, the corporate has 1 subsidiary and no associates/joint ventures.

Funding Rationale

• Market chief – Indus Towers is the main supplier of tower infrastructure within the nation, serving high Telecom Providers Suppliers (TSPs). It primarily gives shared entry to its towers for wi-fi telecommunications suppliers via long-term contracts. The corporate is steadily rising its market share, fuelled by the speedy rollout of 5G providers by TSPs, which has considerably boosted its income. Moreover, the continued enlargement into rural areas by main purchasers is predicted to create additional development alternatives. The corporate presently serves all telecom suppliers throughout India and has a presence in all 22 telecom circles nationwide. With an industry-leading tenancy ratio of 1.65x, Indus stays a dominant power within the sector. The corporate can also be constantly reaching secure monetary efficiency underpinned by strong tower and co-location additions. Throughout Q3FY25, it added 4,985 macro towers and seven,583 macro co-locations.

• Development methods – The corporate has collected important overdue from VIL. It has additionally secured a major share of the roll out by VIL. The corporate can also be specializing in optimising its energy and gas price (which is a significant contributor of the corporate’s working expense) via decreasing diesel price and rising using photo voltaic power. The corporate’s photo voltaic websites presently stand at 28,000 which was 25,000 through the earlier quarter. It has additionally entered into an influence buy settlement with a strategic companion for procurement of renewable power of 130 MW photo voltaic plant through a 26% acquisition of stake at a consideration of Rs.38 crore. It is usually transitioning its battery portfolio to lithium-ion batteries which has decrease charging time and an extended life. The corporate is pivoting in direction of an elevated share of lighter tower variant. These strategic initiatives are anticipated to enhance working and value efficiencies. The corporate plans to foray into the EV charging infrastructure sector and has launched its pilot providers within the enterprise hub of Gurugram and the southern metropolis of Bengaluru.

• Q3FY25 – Through the quarter, the corporate generated income of Rs.7,547 crore, a rise of 5% in comparison with the Rs.7,199 crore of Q3FY24. Working revenue elevated from Rs.3,622 crore of Q3FY24 to Rs.6,997 crore of Q3FY25, a development of 93%. The corporate reported internet revenue of Rs.4,003 crore, a rise by 160% YoY. The earnings have been influenced by the gathering of overdues and assortment of Rs.19.1 billion from monetization of the secondary pledge on shares by VIL within the firm. Adjusting to this, EBITDA and internet revenue has improved by 8% every through the quarter.

• FY24 – Through the FY, the corporate’s income was flat at Rs.28,601 crore. Working revenue was at Rs.14,694 crore, up by 50% YoY. The corporate reported internet revenue of Rs.6,036 crore, a rise of 196% YoY. Through the monetary 12 months, the corporate crossed 2 lakh towers in its portfolio.

• Monetary efficiency – The corporate has generated income and internet revenue CAGR of 27% and 17% over the interval of three years (FY21-24). Common 3-year ROE & ROCE is round 22% and 19% for FY21-24 interval. The corporate has a strong capital construction with a debt-to-equity ratio of 0.75.

Business

The telecommunications {industry} in India is among the fastest-growing sectors and a significant contributor to employment, rating among the many high 5 job turbines within the nation. Inexpensive tariffs, roll-out of Cell Quantity Portability (MNP), evolving consumption patterns of subscribers, authorities’s initiatives in direction of digitization are bolstering India’s home telecom manufacturing capability, and a conducive regulatory surroundings lays robust basis for exponential development within the {industry}. As of Might 2024, India is the second-largest telecommunications market globally, with a complete of 1,203.69 million phone subscribers. Nonetheless, rural tele-density stands at simply 59.59%, presenting a major development alternative on this underserved space. Moreover, India is already laying the groundwork for 6G by investing within the know-how’s improvement.

Development Drivers

• In Union Finances 2024-25, the Division of Telecommunications and IT was allotted Rs.116,342 crore (US$ 13.98 billion).
• Authorities initiatives resembling 100% FDI allowed below the automated route, PLI for Telecom and Networking gear, Digital Bharat Nidhi Fund, diminished license charges, and spectrum liberalization.
• Rising inhabitants and a quickly rising web penetration price with is predicted to drive the demand for telecom providers.

Peer Evaluation

Opponents: Suyog Telematics Ltd, Sar Televenture Ltd and many others.

In comparison with the above opponents, Indus Towers stands out as essentially the most undervalued inventory on this section. The corporate is constantly translating its regular development in gross sales into increasing margins and earnings.

Outlook

The corporate’s 4 strategic priorities are: a) rising market share, b) bettering price effectivity by optimizing diesel utilization, c) guaranteeing community uptime, and d) selling sustainability. Through the previous 12 months, the widespread rollout of 5G providers by operators has pushed increased income streams and fuelled robust development for the corporate. Components that might drive development embody large-scale nationwide operations in an {industry} with important entry boundaries, the rising potential for information consumption and the rise in information customers/gadgets, a robust presence throughout all telecommunications circles, and long-term contracts with purchasers.

Valuation

The demand for telecom infrastructure is predicted to remain robust, pushed by excessive information consumption, speedy 5G rollouts, and the present community hole in 4G providers. We consider Indus Towers Ltd. is well-positioned to make the most of these developments. We advocate a BUY ranking within the inventory with the goal worth (TP) of Rs. 413, 16x FY26E EPS.

Danger

• Monetary stability of TSPs – The rising investments in 5G rollout, together with different providers and spectrum acquisitions, are placing stress on TSPs’ financials. This might doubtlessly have an effect on their means to make funds to Indus Towers, which could, in flip, impression the corporate’s monetary efficiency.

• Unfavourable phrases for contract renewal – Any unfavourable adjustments to the contract phrases with the consumer, resembling decrease pricing or annual worth escalations when renewing leasing agreements, pose a danger to the corporate.

Recap of our earlier suggestions (As on 31 January 2025)

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