Indus Towers Pauses Cash Returns To Shareholders Amid Vi Woes, High Expenses

(MENAFN- Live Mint) Bharti Airtel's telecom tower arm Indus Towers on Thursday said that it has put on hold any immediate plans to distribute cash to shareholders. The company is keen to conserve cash amid financial stability concerns surrounding its major customer Vodafone Idea, even as it is looking at a higher capital expenditure cycle, and evaluating potential inorganic growth opportunities.

“The board believes that this is the best interest of the company: strengthening its financial resilience and enabling it to respond effectively to any emerging opportunities and or risks, ensuring the security of its long-term business interest,” Prachur Sah, managing director and chief executive officer of Indus Towers, said in a post earnings call with analysts.

The company will now take a call on the cash distribution by the end of the current financial year.

Also Read | Bharti Airtel slashes pay hikes for employees, including top brass

Without naming the debt-laden Vodafone Idea, Sah said that stability of its customer was not the only reason for the board to cut off cash in the short term but there were other factors too.“The board remains fully committed to creating value for the shareholders, including by way of earliest possible reinstatement of distributions,” he added.

Comments from Sah on the decision to pause returning cash to shareholders-whether through dividends, buybacks, or bonuses-carry significance, especially as Indus Towers has been receiving regular payments from Vodafone Idea, including toward some of its past dues. The company's move to hold off on shareholder rewards in the near term also goes against analysts' expectations, who had anticipated cash distribution in light of improved cash flows.

In 2024, Indus Towers conducted a share buyback-its first since 2016-worth ₹2,640 crore. The company's stock fell nearly 6% to ₹361.40 apiece on NSE on Thursday, as it held off on rewarding shareholders and as its quarterly profit fell 10%.

Also Read | Bharti Airtel share price drops. Does UBS downgrade signal a trend reversal?

In the April-June quarter, Indus Towers reported a free cash flow generation of ₹1,566 crore, compared to ₹1,870 crore in the year-ago period. The company said its cash flow generation during the June quarter was driven by sustained business momentum and collection of overdue receivables, which also led to a ₹400 crore reduction in trade receivables sequentially.

As of June-end, the company's trade receivables were at ₹4,361 crore, compared to ₹4,768 as of March-end, period and ₹5,722 crore in the year-ago quarter.

Even as Vodafone Idea has been clearing its dues, Indus Towers currently has created a provision of doubtful debt of ₹210 crore in relation to Vodafone Idea as of June-end, compared to ₹298 crore as of March-end. Currently, Vodafone Idea's ability to continue as a going concern and settle its liabilities is dependent on support from the department of telecommunications (DoT) regarding the adjusted gross revenue (AGR) matter, fundraise through equity and debt and generation of cash flow from operations.

One of the key reasons for Indus Towers to take a cautious approach towards cash distribution could be its concerns related to possible loss of business from Vodafone Idea in case the telecom operator is unable to continue as a going concern. In its earnings statement, the tower company acknowledged that if its customer (Vodafone Idea) is not able to continue as a going concern and Indus Towers fails to attract new customers, there could be an adverse effect on its business.

Also Read | Perplexity dethrones ChatGPT, become the top free app on Apple App Store

In the April-June quarter, Indus Towers reported a 9.1% year-on-year (YoY) increase in revenue from operations to ₹8,058 crore. However, the net profit fell 9.8% at ₹1,737 crore due to higher expenses such as depreciation owing to acquisition of new towers from Bharti Airtel and higher energy and power expenses such as increased diesel consumption: The company saw a 10% year-on-year increase in diesel consumption in Q1 FY26. This was attributed to unforeseen events like the early onset of monsoon and an unusually high number of weather-related disturbances (heavy rainfall and thunderstorms), which required more diesel usage to maintain network uptime, the management said during the earnings call.

On organic and inorganic growth opportunities going forward, Sah said,“the idea is to see how we can capture the maximum market share when it comes to towers in India. So as of now the focus remains on tower business growth.”

Besides growth opportunities, the tower company is looking at incurring capital expenditure (capex) for maintenance of old sites, new tower additions, technology transition with regard to batteries for tower infrastructure, among other things.

In the June quarter, the company incurred a capital expenditure of ₹1,948 crore, compared to ₹1,882 crore in the year-ago period. Of it, the maintenance capex, which is on repair and maintenance of existing tower sites, rose to ₹551 crore from ₹260 crore a year ago.

“We have an aging portfolio and there are years when we will see a lot of focus on tower strengthening, maintaining etc. So, this is one such year where we are focusing a lot on strengthening our towers and basically making those towers ready for any tenancy growth,” said Vikas Poddar, chief financial officer of Indus Towers.

Indus Towers is transitioning from the old batteries to more lithium ion, new tech batteries that have a higher upfront capex involved, Poddar said, adding that there will be higher maintenance capex for the next 3-4 years.

Sah said that the tower additions from all the customers will be strong in the current financial year. Further, rising data consumption and increasing 5G adoption will continue to create meaningful growth opportunities, he added.

In the June quarter, the company added 2,468 towers sequentially, taking its towers count to 251,773. The co-location sites were at 411,212 compared to 405,435 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 average sharing factor for Indus Towers was at 1.63 during the quarter. This is a key metric which tells the average number of tenants per tower.

MENAFN31072025007365015876ID1109870174