Indus Towers working with Vodafone Idea to recover dues; expects to benefit from telco's improving financial situation: Prachur Sah, MD

After Vodafone Idea's successful Rs 18,000 crore follow-on public offer (FPO), Indus Towers expects to benefit from the telco's improving financial situation and is confident of quickly recovering its backlog of past dues.

The country's biggest telecom infrastructure company expects Vodafone Idea’s fundraising to provide new growth opportunities soon as Vodafone Idea kickstarts its 4G expansion and 5G rollout in its 17 priority circles.

“We are pleased to see the recent positive development on the customer's fundraising side, and we remain engaged with the customer to clear our past dues. We are currently working with the customer to define how this is going to work, but we expect dues to be cleared,” Prachur Sah, Managing Director & CEO, Indus Towers, said during the Q4 earning call on May 1.

“As dues are getting cleared and network expansion activities are starting, we expect tenancies to go up positively,” he said.

Vikas Poddar, Indus Towers' Chief Financial Officer, said that the positive development surrounding the financial situation of one of its “major customers” is another leading aspect that the company expects to benefit from.

“We are pleased to see progress and its [Vi] fundraising and we expect these developments will help the customer clear our past dues and provide us with growth opportunities given the customer is planning to invest in the network expansion,” he said during the call.

Ambit Capital recently estimated Vodafone Idea's past dues to Indus to be around Rs 10,000 crore.

Indus executives said the company recovered additional sums beyond the 100% collection of current dues in the March quarter, which had led to some write-backs in provisions. As a result, Indus' allowance for doubtful receivables had reduced to around Rs 5,385 crore in the March quarter, FY24, from around Rs 5,700 crore in the quarter ended December.

They added that the company's board would take a call on dividend payouts in FY25, but the timing would hinge on how rapidly Vodafone Idea can clear its past overdue and bolster operations.

Poddar said dividend payouts would be an important consideration

The executives signalled that the tower company's dividend policy remained linked to its FCF (free cash flow) position, which is likely to remain pressured by elevated capex amid aggressive tower network expansion, courtesy of top customer Bharti Airtel's aggressive 5G rollouts and rural push and Vi's upcoming network expansion.

Vodafone Idea’s chief executive, Akshaya Moondra, told Moneycontrol on April 18 that the telco would clear vendor dues using internal accruals over time.

Moondra said that the telo was not considering a “one-shot” clearance. “We are very clear that the funding we are raising is primarily meant for growth capex. It is not being raised to clear vendor dues. Vendor dues have to be cleared from internal accounts.”

Vodafone Idea is currently engaged with all 5G telecom gear vendors but said that order placement will depend on how early it secures funding for capex. Of the total FPO proceeds, the telco proposes to use Rs 12,750 crore to purchase equipment for expanding its network infrastructure by setting up new 4G sites, expanding the capacity of existing 4G sites, and new 5G sites. It will spend Rs 5,720 crore of the Rs 12,750 crore earmarked for network expansion on setting up its 5G network.

Indus Tower said strong 4G and 5G network rollout momentum will continue, which will be significant levers of near-term growth.

“We expect the rural expansion of a major customer and the 5G rollout to continue to be significant levers of near-term growth. We have seen three to four-quarters of very strong tower rollouts. The momentum has not slowed down, and we expect it to continue for a few more months and quarters. There will be a high capex phase some more time,” Poddar said.

On April 30, Indus Towers reported a 32 percent jump in its consolidated net profit to Rs 1,853 crore for the fourth quarter ended March 2024 on the back of Bharti Airtel’s 5G rollout and steady collections and past clearance of overdues from Vodafone Idea.

The company's consolidated revenue from operations grew 6.5 percent to Rs 7,193.2 crore during the reported quarter, compared to Rs 6,752.9 crore in the March 2023 quarter.

Poddar said that network expansion by a major customer and increased market share helped Indus deliver record tower additions.

The telecom infrastructure company surpassed 2 lakh installed mobile tower base in FY24.