Indus Towers Ltd Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kunal Vora - BNP Paribas Exane - Analyst : Congrats for a strong quarter. First is your co-location addition this time was much higher versus tower addition. It looks like you're getting new business from Vodafone Idea. So I wanted to get a sense on how is the pipeline looking at both from Airtel and Indus. I know you won't be able to specific details, but if you can just talk about how is the pipeline looking. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 9:00AM, INUS.NS - Q3 2025 Indus Towers Ltd Earnings Call

Question: Kunal Vora - BNP Paribas Exane - Analyst : What's the kind of visibility which you have right now?

Question: Kunal Vora - BNP Paribas Exane - Analyst : Okay. That's helpful. And second is what's the kind of investment you are looking to make in the EV charging infrastructure? Like a few years back, you were investing in smart cities. Eventually, it [settled out]. So how different is this opportunity, if you can just give us your sense on what you're looking at here?

Question: Kunal Vora - BNP Paribas Exane - Analyst : But if you can just give some sense on like what is your right to win, how many sites might have any potential, what's the kind of competition, which is also working on this? Like you don't like own the land, so how would the deal with landlords sort out? Whatever you can provide on this.

Question: Kunal Vora - BNP Paribas Exane - Analyst : By when do you think we can hear more about this?

Question: Manish Adukia - Goldman Sachs - Analyst : (inaudible) Kunal's question. Now when you talk about the new customer, Vodafone Idea, which you said have started rolling out, and you have a good share of those rollouts, can you give us a sense of what your market share with Vodafone Idea has been in the new rollout? And is that broadly similar to the market share you have with your number one customer, Bharti Airtel? And is it safe to assume that majority of the rollout and the visibility that you talked about for the next few quarters for Vodafone Idea, that is largely going to be on existing towers? And for Vodafone Idea, in particular, you don't necessarily have to roll out new towers, so that -- they should largely come with -- come in the form of tenancies. That's my first question, please.

Question: Manish Adukia - Goldman Sachs - Analyst : Got it. Helpful. And just a second quick bookkeeping question. So after the collections from Vodafone Idea in the quarter of about INR30 billion-odd in form of past dues, I know that the outstanding provision amounted about INR5 billion or thereabouts. Is that all that is remaining now as far as past dues are concerned from Vodafone Idea? Or is there anything else on top of that as well?

Question: Vivekanand Subbaraman - Ambit Capital Pvt Ltd - Analyst : So the first question that I have is on the capacity. So in any given quarter, what is the maximum number of co-locations that you are capable of rolling out? And is that going to be a constraint at all if Voda Idea decides to aggressively expand population coverage like it has suggested? And is there a theoretical limit in terms of, let's say, 20,000, 30,000 co-locations per quarter that your field force is capable of deploying? That's one. Secondly, as far as the balance sheet is concerned, I see that your debt excluding lease liabilities is down to only INR1,000 crores. Now that you are collecting money on time from Vodafone as well as the company is clearing past dues with you, when can we expect the balance sheet to get more optimized and leverage to come back so that investors get amplification of returns like they do with other global tower companies?

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : My first question is on our new venture for EV charging. I appreciate it's very early stage, but just want to understand from a capital allocation point of view, what sort of hurdle rate do we look at when we evaluate and decide to pilot and then maybe eventually sign contracts on this business?

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Understand. And since you're kind of doing some sort of pilot, do we have any sense on the TAM of this business? Any external agencies we would have deployed before we, I mean, get into this business?

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Got it. Got it. One small clarification. I don't know if this is discussed. I got disconnected. On the dividend, I mean, since we are now coming out of the bad phase and all the debt provisions -- bad debt provisions are largely behind, what should we expect with respect to dividend payout? Do we expect to get back to old ways, paying out almost all of free cash flow eventually? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 9:00AM, INUS.NS - Q3 2025 Indus Towers Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : A couple of them are bookkeeping question. I will start with them. First, on the provision reversal. Your note to account says that this quarter had a provision reversal of the collection of INR29 billion. In your opening statement, you suggested INR30.2 billion. So what is the difference between the two? So I am referring to notes to account.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. That's clear. Second, on the trade receivables. If I look at quarter-on-quarter, trade receivable has gone from INR56 billion in last quarter end to INR73 billion in this quarter. What has led to the sharp increase in the trade receivables?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Money was received in January. Hence, the --

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : That's a timing issue. No, that's very clear now. The next question is on the CapEx. We had one of the highest tenancy addition, and the CapEx number was quite muted. What explains this CapEx?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. Got it. And just a follow-up question on the tenancy addition. I don't know if you can help us understand or asserting, what is your existing run rate market share in the Vodafone's rollout? On the market share we had earlier, if not the number.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Yes, I know we have a dominant market share. Are we also have a dominant incremental market share?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Clear, clear. That's very clear. One last question on the EV infrastructure business. The tower business was quite straightforward for us. We used to get order, and based on the orders, we used to put the tenancy or tower. But in case of EV, we need to choose the location and then look for a potential business out of it. Do we -- are we building the expertise? Are we building a different business unit for it? Because though on the face of it, the business moat looks same, but the business economics are very different. Will it run -- will it be run by a separate team as a different team?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. And also, sir, you mentioned that you had one of the highest IBS addition in this quarter. Can you help us understand how big has it become? What is the opportunity? Are we looking at it? Along with that, can you also help us understand the effort what we are doing towards build the micro cell towers. Where are we in that ecosystem now? I know we do mention the leaner towers, but are they same as micro towers?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. Got it. That's pretty much clear now. On the loss we are making on the energy, that continues to remain sticky, though the diesel proportion has been coming down and the renewable proportion is going up, but the percentage loss has been sticky. Can we expect some reduction starting FY26 as a percentage of energy margin losses?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : I got one last question on the rental per tenant, which has grown 0.7% sequentially, while our tenancy sharing has been improving, which should have ideally led to some dilution in the rental per tenant as the tenancy sharing goes up. Was it a timing issue and that should start showing up from? Or do you think the loading will still be driving this rental per tenant going up even in the ensuing quarters?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. Got it. But structurally, as the tenancy sharing goes up, the ARPT should slightly come down, right?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. Got it. One, probably, last question. In the opening remarks, you said that now the loading is catching up and we are nearing the 5G tenancy rollout, in how many quarters do you think you'll start seeing the 5G stand-alone tenancy being rolled out by the operators?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. But (inaudible) in terms of adding more tenancy? Or you don't see that happening? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 9:00AM, INUS.NS - Q3 2025 Indus Towers Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Will the FWA rollout by Airtel, will that help in adding more tenancies?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : So my first question is on the anchor tenant characteristics, with Vodafone no longer a shareholder. Are they still anchor tenant? Or there is any -- what are the perks that -- the benefits that we had because of the anchor tenancy we tend to have or tend to lose because of this?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : Okay. But we will be still building towers for Vodafone if they request? You see a difference?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : And now that we are finally fully out of the bad debts and the receivables issue, in future, if this kind of a situation repeats, what do we have, which can -- where the things can play differently? Do we have any plan or any levers to tackle the same issues in a different manner in the future?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : No. Why I'm asking this, in the past, we had some kind of security in terms of their interest in our stake or shareholding pattern, which is no longer will be there. So initially, we had this cushion. Probably, going forward, we will not have, so that's the basis behind the question. But nevertheless, because I think you're also actively pursuing the business from the BSNL expansion also. Is it the right understanding?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : So typically, the government being -- I mean government PSUs being counterparts, again, the receivable issues kind of crops up. We are seeing it in the multiple other sectors. So what kind of a framework we have to tackle this kind of a risk to safeguard the ring-fence, the risk coming from these future businesses? Any thoughts on that?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : Right. Any indication from their side, how their rollout looks like? And what kind of a business you expect in terms of -- relatively with respect to, say, Vodafone's business or versus Bharti's business? Some color on that, please? Is it maybe for --?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : Okay, okay, okay. And also regarding the investments in the energy business, not the separate one, but within the tower energy business. So far, I think if you can broadly split the CapEx that we have spent in the last three years on the core business versus what we have invested in the energy, that will help us in understand the magnitude of the investments we have made.

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : Okay, okay. So put it in another way, so we are spending close to INR800 crores of maintenance CapEx roughly every year. So this energy CapEx will go into the maintenance as well?

Question: Arun Prasath - Avendus Spark Institutional Equities - Analyst : Okay, okay. And anything you can call out on the investments in the renewables within this?

Question: Vivekanand Subbaraman - Ambit Capital Pvt Ltd - Analyst : As per the DoT, India has around 817,000 towers. Now you have 2,35,000 towers. Altius has around 250,000 towers and BSNL, 70,000. So who has the industry's remaining towers? And are there any consolidation opportunities left in the tower space for you presently? Secondly, can you talk about the size of the revenue pools that are there in the small cells and lean tower markets compared to the current macro tower opportunity that you are pursuing?

Question: Vivekanand Subbaraman - Ambit Capital Pvt Ltd - Analyst : Okay. Is there any quantification possible at all in terms of potential revenue opportunity, maybe, say, broad ranges like 10% of current macro opportunity, 20%, 50%. I don't know. I'm just asking if small cells, lean towers, IBS put together, can it be material for you? Or is it just very small and perhaps only moves the needle marginally? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 9:00AM, INUS.NS - Q3 2025 Indus Towers Ltd Earnings Call

Question: Vivekanand Subbaraman - Ambit Capital Pvt Ltd - Analyst : Fair enough. No, I wasn't just referring to the current numbers. I was thinking more from a three- to five-year perspective that can this be 10% or 20% of your business on aggregate, small cells, lean towers, IBS, in three to five years.