The most important winner from the profitable Vodafone Thought FPO that was efficiently concluded final month was not Vodafone Thought, it was relatively Indus Towers which has witnessed a change of fortunes as in comparison with identical time final 12 months.  

From a lifetime excessive of ₹479 in 2015, the inventory of Indus Towers was in a long-term bear market until April 2023 because it fell to as little as round ₹135. Disruption within the telecom trade following entry of Reliance Jio in 2016 reducing the variety of gamers, impacted development and tenancy ratio (common variety of operators utilizing a single tower) and profitability for Indus Towers. Additional, uncertainty on viability of Vodafone Thought pressurised the inventory by a lot of 2022 and 2023.

As considerations had been  mounting, at bl.portfolio we had noticed a compelling alternative within the inventory in June 2023. Unloved by many market gamers, Indus Towers was obtainable at a distressed valuation of one-year ahead PE of 8 instances and EV/EBITDA of  4.6 instances. At these ranges, the the shares had been absolutely discounting the considerations then on whether or not the Indian telecom market would find yourself as a duopoly. This made the chance reward solely beneficial for brand new traders as draw back was low, given valuation assist.  Considerations had been already discounted, whereas upside potential was fairly important contemplating the chance of Vodafone Thought reviving. This thesis predicated the purchase name we had given on Indus Towers in bl.portfolio dated June 11, 2023, when the inventory was buying and selling at ₹157.

Nearly a 12 months since then, our thesis has largely performed out, with Indus Towers up by 120 per cent since our purchase name. What ought to traders do now?

The enterprise prospects positively look higher than a 12 months in the past, with a variety of readability now that Vodafone Thought will survive as a viable third personal participant within the Indian telecom market. On the identical time, the valuation shouldn’t be that engaging, with the inventory now buying and selling at a one-year ahead PE of 14 instances versus five-year common of 11.7 instances, and EV/EBITDA of seven.1 instances (5yr common at 5.6 instances). Whereas some premium to historic common is warranted given the final 5 years had been extra of a turbulent interval for the sector suppressing valuation for Indus Towers, there is probably not a lot scope for cheap growth in multiples from present ranges. That is contemplating the present Bloomberg consensus estimates projecting FY24-26 income, EBITDA and EPS CAGR of 8, 4 and 9 per cent respectively.

Whereas we count on the enterprise to stay good/steady and develop gradual and regular from right here, a lot of the optimistic developments and implications seem largely priced in. We therefore suggest that traders now guide earnings in Indus Towers and lock in on the sizable good points of the final one 12 months.


Indus Towers in its current kind was shaped by the merger of Bharti Infratel and erstwhile Indus Towers (which was a tower three way partnership between Bharti Airtel, Vodafone and Thought) in 2020. Following the merger, Indus Towers is the biggest telecom tower infrastructure supplier within the nation and one of many largest globally. It is usually the one pure play listed participant on this house.

Its main enterprise is to amass, construct, personal, function and keep tower and associated infrastructure. Tower infrastructure refers to tools corresponding to towers, shelters, energy regulation tools, battery banks, diesel generator units, and many others, required at websites the place towers are put in. Such a facility is also referred to as passive infrastructure within the telecom context. These amenities are utilised by wi-fi telecom service suppliers on a shared foundation, below long-term contracts. Leasing exterior tower infrastructure frees monetary capital for telecom service suppliers to put money into their core operations. All wi-fi telecom service suppliers in India are clients of Indus Towers.

Prospects for the corporate rely upon a mixture of accelerating demand for towers as wi-fi telecom density will increase in addition to rising utilisation of/co-locations in towers as newer and enhanced choices corresponding to 5G drive demand.

Indus Towers has nationwide presence, with operations in all 22 telecom circles.


As of March finish, it had 2,19,736 towers and three,68,588 co-locations (a couple of telecom operator utilising identical tower), up by 14 and eight per cent respectively over the past one 12 months. Tenancy ratio at 1.68 was decrease than 1.78 identical time final 12 months. This, nonetheless, is predicted to enhance as Vodafone Thought begins investing in 4G and 5G initiatives utilizing the FPO cash. Increased tenancy ratios lead to increased margins, which is prone to begin reflecting in financials from FY26/27.

For the 12 months FY24, the corporate reported income, EBITDA and web earnings of ₹28,601 crore (up 0.8 per cent Y-o-Y), ₹14,694 crore (50.4 per cent)  and ₹6,036 crore (196 per cent) respectively. The numerous leap in EBITDA and web earnings was pushed by one-off elements, primarily  write-back of provisions made earlier for sure dues from Vodafone Thought. Therefore what has occurred is extra a of normalisation in FY24 with EBITDA margins at 51.3 per cent, extra in sync with EBITDA margins at 53.9 per cent in FY22 (had fallen to 34.3 per cent in FY23).  The corporate’s Steadiness Sheet is robust, with web debt/EBITDA at a cushty 1.3 instances.  

A key issue that used to drive curiosity in Indus Towers inventory earlier was dividends. For instance, the corporate had declared dividends of ₹11 for FY22 and 20 for FY21 leading to engaging dividend yields then. Following receivable points with Vodafone Thought, no dividends had been paid in FY23. For FY24 no dividend has been declared on account of increased capex, and dividends seem unlikely in FY25 as effectively.

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