Indus Towers Ltd Q4 2025 Earnings Call Transcript

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

Question: Sachin Salgaonkar - BofA Securities - Analyst : I have 2 questions. First question is on dividend. There was a general expectation that once backlog from Vodafone Idea is cleared, your company will start giving dividends? Wanted to know the reasons for dividend being not declared and a committee being constituted. And any general thoughts that what would be a time line when we could see your decision either on dividend or buyback coming? Related question to that is, we are acquiring Bharti's 12,600 towers. So the amount, roughly INR20-odd billion what you're paying to acquire these towers. Will that also be constituted when you guys consider paying dividends? So that's question number one.

Question: Sachin Salgaonkar - BofA Securities - Analyst : Okay. And sorry, just to be clear that the committee is not going to take too much time. So within 3 months, a decision should be then by the time you end up reporting your 1Q numbers before that we should get a visibility on dividend or buyback, right?

Question: Sachin Salgaonkar - BofA Securities - Analyst : My second question is I just wanted to understand when should we start seeing tenancy improvement? Now I understand the incremental towers which have acquired this tower has dipped a bit of a tenancy, but from the business which is coming from Vodafone Idea ideally should lead to a tenancy improvement, which we are not seeing in the numbers. So wanted to understand, should tenancy remain range-bound in the range of 1.63 to 1.65 or we should directly see that moving up going ahead? .

Question: Sachin Salgaonkar - BofA Securities - Analyst : And that momentum should continue going ahead. Prachur?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : I have a couple of them. First, starting with the dividend. The dividend policy remains intact, right? 85% of the free cash flow will be distributed to the investors. Does the method of repaying the cash is to be decided or even the dividend policy is being rethink by the committee?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : And number two, we still have some debt on the book. What will be the priority in terms of cash distribution from the capital allocation perspective is to first go net debt free and distribute the remaining cash to the investor? Or we are okay with the small leverage on the balance sheet?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Clear, clear. My next question is on the growth. Again, Prachur, you mentioned in your opening remarks that we will look at both organic and inorganic options to drive the acceleration in the growth. What do we really looking at in the next 2 years in terms of an acquisition, if we have anything in the mind? And from an organic perspective, anything in the mind apart from the normal business of passive infrastructure?

Question: Vivekanand Subbaraman - AMBIT Capital Private Limited - Analyst : At the time of announcing the purchase of towers from Airtel, you had mentioned that you will take loans to fund this transaction. Just to understand this better, in your balance sheet, I see that the borrowings are flat on a sequential basis. Does this mean that the transaction has not been funded with debt? That is question one. And secondly, I think to Sachin's question on dividends, I think Vikas, you said that the Airtel transaction will also be a consideration for payment of dividend. Why is that the case? Because it seems to contradict what you said in the press release when you announced the purchase of towers.

Question: Vivekanand Subbaraman - AMBIT Capital Private Limited - Analyst : Okay. And on my second question, which pertains to dividends. Will the amount that was paid out to Airtel, will it be available? Or has it already been earmarked for that purchase, so now it is not available for distribution? Just to clarify that. I know the committee is still evaluating it, but because you had specifically called out that this transaction will be debt funded, we thought that this money is available for dividend distribution.

Question: Aditya Suresh - Macquarie Research - Analyst : Two questions. First is, can you give us an update on the industry structure, in particular, kind of I will be curious to see what you're seeing on the ground with Summit and ATC combining operations.

Question: Aditya Suresh - Macquarie Research - Analyst : There's no migration which you're seeing, is that a fair understanding?

Question: Aditya Suresh - Macquarie Research - Analyst : Okay. The second question is on the tower rentals per operator, which you're collecting right? So despite the increased 5G loading, despite the inflation is embedded in the contracts, we've seen that moderate, right? So in the context of kind of what you said about this aggressive market share capture plans, plus noting that kind of I appreciate that if a second operator kind of comes into these towers, all operators get a discount. How should we directionally think about your rental revenues per operator trending? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 9:00AM, INUS.NS - Q4 2025 Indus Towers Ltd Earnings Call

Question: Aditya Suresh - Macquarie Research - Analyst : Thank you for the clarification.

Question: Arun Prasath - Spark Institutional Equities Private Limited - Analyst : Prachur, in your opening remarks, you mentioned that there is roughly 40,000 5G towers added during the year in the industry. Can you talk about more qualitatively on these, where this was done and what kind of towers was done and similar kind of attributes in these 5G towers?

Question: Arun Prasath - Spark Institutional Equities Private Limited - Analyst : Okay. Okay. So as such, there is the infill towers for 5G, it's not yet started on a broad basis? .

Question: Arun Prasath - Spark Institutional Equities Private Limited - Analyst : Okay, understood. Is there any instances where operators have felt consisted in certain clusters and adding infill towers, is that started in certain clusters or it's largely they are having lower utilization in the cluster level? Unidentified Company Representative See, we would not be able to comment on the utilization of per cluster for the operators. We certainly see data growing and obviously, that's the reason why coverage and capacity infills, sites are continuing to grow. But of course, as the operators feel congested in any clusters, they certainly would come back and ask us to put up either new towers or they'll roll out more capacity on the same site but that's a continuous thing that is yet happening.

Question: Saurabh Handa - Citigroup Inc. - Analyst : I had 2 questions. Firstly, again, just to clarify on the dividend bit, so your free cash flow in the fourth quarter was INR39 billion. This obviously does not include the consideration for the tower acquisition, which was INR18 billion. So if I take -- I mean what would be the number you would consider for dividend payout? Would you take INR39 billion ? Or would you take INR39 billion minus INR18 billion, which is INR20 billion. So I assume your policy remains to pay out 100% of free cash flow. Just wanted some clarification because I think I've been a bit confused because previously, you had said that the acquisition would be completely debt funded and therefore, not have a bearing on shareholder returns.

Question: Saurabh Handa - Citigroup Inc. - Analyst : Okay. Sure. Sure. And just my question, you spoke about the ARPT being impacted by the denominator, which makes sense. So in fiscal '25 the ARPT, which was 40,856 what would be the number if you hadn't adjusted for the acquisition? I'm just trying to get a sense of, say, compared to the previous financial year, I think the number you've declared was INR41,198. So what would that number be now?

Question: Saurabh Handa - Citigroup Inc. - Analyst : Okay. So even the ARPT of that 41, 893 includes the acquisition.

Question: Saurabh Handa - Citigroup Inc. - Analyst : I'm sorry, you said that would be how much without it, 2.?

Question: Vivekanand Subbaraman - AMBIT Capital Private Limited - Analyst : Yes, I have a couple of follow-ups. So number one is on the new composite billing scheme that you have rolled out. Earlier, you were mentioning about a very different kind of energy contract model, fixed energy model versus reimbursement. Is this composite billing in the nature of the fixed energy model. Can you please elaborate on how this could potentially influence your energy margins in the long term? That is question one. Secondly, based on your conversations with telcos, how is the fiscal '26 CapEx outlook looking like for you? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 9:00AM, INUS.NS - Q4 2025 Indus Towers Ltd Earnings Call

Question: Vivekanand Subbaraman - AMBIT Capital Private Limited - Analyst : Yes. Just on that, one small follow-up. We saw that the CapEx has declined by around 24% in fiscal '25 versus '24. And this trend has been pretty much intact through the quarters. So should we take fiscal '25 as a new normal for CapEx? Or will it further go down from here?

Question: Kunal Vora - BNP Paribas Exane - Analyst : First is maintenance CapEx seems a little higher this quarter. Any reason for that?

Question: Kunal Vora - BNP Paribas Exane - Analyst : Understood. And on Energy margins, what I understood is there is a one-off impact because of budget looks higher, but otherwise normalized it's 2%. How are you looking at it going forward around 2% range.

Question: Kunal Vora - BNP Paribas Exane - Analyst : And on rental revenue on the way forward, how do we look at it? Like fourth quarter the new tower rental revenue did not come in, right? Or at least like it came a very small proportion of that would have come. So in 1Q, we should see a full reflection of the new tower?

Question: Kunal Vora - BNP Paribas Exane - Analyst : I was talking about acquired towers.

Question: Kunal Vora - BNP Paribas Exane - Analyst : Understood. But in that piece, what was the driver of rental revenue this quarter, 4.5% quarter-on-quarter in the recent number?

Question: Kunal Vora - BNP Paribas Exane - Analyst : Any part of that would have been one-off? Then how do we think about that?

Question: Kishan Mundhra - DAM Capital Advisors Limited - Analyst : I just have one question. So in the previous quarter, you had announced your foray into EV charging infrastructure. So just wanted to understand if you have firmed up any plans on that front? And what is your CapEx that you expect to put into this business over the next 2 years?

Question: Chetan Sharma - Systematix Shares and Stock Limited. - Analyst : So my question regarding the potential partnership between the (inaudible) and the telecom giants like, Airtel, Jio, Vodafone. The question is that what is the role of the future on the traditional towers? Would this collaboration render the tower.

Question: Varatharajan Sivasankaran - Antique Stockbroking - Analyst : At one point in time, discussed about the possibility of entering into infrastructure like data centers. Is there any kind of a discussion on that? Do you see something like that happening in the future?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Yes, Vikas, I got just one clarification. There is a line item in the cash flow which talks about the consideration paid for the acquisition of passive infrastructure of INR1,800 crores. This, I thought is a payment for the Airtel, for the towers we bought, correct?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Because in many instances, we told that we haven't paid this consideration. I saw that it's been paid, right? There's nothing pending to be paid to Airtel from this perspective, right? Only Hexacom deal is yet to be consummated. Is that understanding right?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. That's one. Second, Prachur, I was just asking a question before I got disconnected. So if you look at the growth on the data side, it has materially decelerated despite FWA, one of the largest operator has reported under 20% growth on the data, the data consumption really showing pattern of saturating. And mind if this is despite 5G being unlimited today. Once it cap, I think things may get only lower on the growth side. Do you think the demand for tower itself see a material decline and now that we have created so much of capacity on 5G? Do you think that the growth -- because again, if you look at industry wide, the tenancy addition has materially slowed down in last 1 year, any reason to believe that the growth will continue on the tenancy addition, apart from Vodafone helping to up their coverage on 4G and 5G? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 9:00AM, INUS.NS - Q4 2025 Indus Towers Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Clear, clear. One data keeping last question. Vikas. you said that we have consolidated or restated the numbers from 19th of November. That means the acquisition should have ideally reflected the full quarter impact, right?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So we have booked all the costs not the revenue?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. Got it. So the cost and depreciation have been accounted for, but not the revenue?

Question: Aditya Bansal - Motilal Oswal Securities Limited - Analyst : This is Aditya Bansal. So just wanted to understand the ARPT profile currently for the towers acquired from Airtel, like what would it be in the next year? What should we take?

Question: Aditya Bansal - Motilal Oswal Securities Limited - Analyst : And like which circles, would this be pertaining to? And is there an opportunity to have an incremental tenant here?