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 order permitting the government to reassess adjusted gross revenue (AGR) dues, a move that analysts say could ease it key customer Vodafone Idea’s burden and, by extension, improve its own risk outlook and valuation, and bolster the sector's overall prospects.

Indus Towers managing director and chief executive officer Prachur Sah called the development “a good sign for the industry,” while reiterating that decisions on dividend payouts remain scheduled for the March quarter. Many brokerages said the ruling could strengthen Vodafone Idea’s survival prospects and narrow Indus Towers’ valuation gap with global peers.

“What has happened is a good development for the industry in general. We welcome that support. As and when the clarity comes, 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 and is committed to distribute the cash to the shareholders and the timing (for review) still remains end of the financial year in Q4. If anything changes, we will keep you posted.”

Notably, financial stability concerns surrounding its major customer Vodafone Idea, was one of the reasons for Indus Towers to put on hold any cash returns to its shareholders. This is because, in the absence of any relief for Vodafone Idea from the government, the company will not be able to sustain, thereby also having an adverse affect on the business of Indus Towers as well.

On Monday, the apex court allowed the government to address the grievances of the beleaguered telecom operator without the court's intervention, and reassess the demand for AGR dues. The court observed there is no impediment in the interest of the government reconsidering the issue and taking appropriate decision in law, thereby clarifying that the matter is within the policy domain of the government.

Vodafone Idea had filed a petition last month challenging the telecom department's demand for an additional ₹9,450 crore in AGR dues. The company also sought a waiver of interest and penalties, arguing that the disputed components of the dues have not yet been finalised. The Supreme Court’s verdict now paves the way for the struggling telecom operator to receive much-needed financial relief, easing concerns about its continued survival.

“We believe this (the court order) could have significant positive ramifications for Vodafone Idea and, by extension, for Indus Towers,” said analysts at brokerage house Citi in a note dated 27 October. “With a large lumpsum amount towards AGR dues coming up for payment by Vi (Vodafone Idea) to the government in March 2026, we believe that relief from the government should be forthcoming well ahead of this deadline – in the coming weeks and months.”

To be sure, Vodafone Idea has been paying an amount equivalent to monthly billing to Indus Towers. As of September end, the company’s trade receivables were at ₹4,851.5 crore compared to ₹4,361 crore in the preceding quarter and ₹5,629 crore in the year-ago period.

Even as Vodafone Idea cleared additional dues amounting to ₹210 crore to Indus Towers during the quarter, the company’s trade receivables rose sequentially. The management attributed the rise in receivables to a timing gap in collection and expects the same to normalize in the current quarter.

“We note that Indus Towers is trading at a discount to global peers, on account of concerns regarding long-term sustainability of Vi—one of its key clients… The SC decision allows it (government) to create a plan for long-term sustainability of the company, thereby increasing chances of survival for Vi (Vodafone Idea). With this, we expect the valuation discount of Indus Towers vs global peers to narrow,” said analysts at Emkay Global in a note dated 27 October.

Africa expansion

Separately, Indus Towers elaborated on its plans to expand into Africa. Last month, the company had said it will expand its footprint in the African markets, beginning with Nigeria, Uganda, and Zambia.

“Anywhere within 3 to 6 months is what we are targeting from today (for Africa foray),” Sah said, adding that there are certain administrative things such as licensing that are under process.

To get started, Indus Towers is looking to bank on Bharti Airtel’s Africa arm as its anchor customer in the market. The company said the foray in Africa will initially focus on organic growth where they will be installing new towers for Airtel and understand the local market.

“We will enter this market with an ability to make a difference on how we can reduce the cost per tower, improve the uptimes and manage energy better. So that will be our value addition to be more competitive in these markets,” Sah said.

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

Indus Towers, however, would look at major scaling decisions later, which could include inorganic expansion as well.

Quarterly show

In July-September, Indus Towers reported a 9.7% year-on-year (y-o-y) increase in revenue from operations to ₹8,188 crore. However, the net profit fell 17.3% to ₹1,839 crore due to higher energy and power expenses such as increased diesel consumption. Besides, a lower reversal of provisions for doubtful debts than in the year-ago period related to collections from a major customer (Vodafone Idea) also affected the profit during the quarter.

The company added 4,301 towers sequentially and 26,416 when compared on a y-o-y basis, taking its tower count to 256,074 as of September end. The co-location sites were at 415,717 compared to 411,212 in the preceding quarter. Co-locations or tenancies refer to how many telecom operators are using a single tower. A single tower can host equipment for multiple mobile operators—each is considered a co-location.

The portfolio tenancy ratio, or the average sharing factor, for Indus Towers was at 1.62 during the quarter. This is a key metric which tells the average number of tenants per tower.