Indus Towers shares plunge after Q1 net profit slumps

New Delhi: Shares of Indus Towers fell nearly 7% in opening trade on Wednesday after it reported a 66% on-year and 73.6% sequential decline in net profit, on account of receivables due to the company from one of its major customers.

Shares of the telecom tower company - among the world's largest - were down 5% at Rs208.25 in early trade Wednesday.

Jointly owned by Bharti Airtel and UK’s Vodafone Group, the telecom tower company reported a net profit of Rs 477 crore compared with Rs 1,415 crore a year ago and Rs 1828.5 crore in the March quarter.


The consolidated revenue for the quarter also declined 3% on-quarter but increased 1% on-year to Rs 6989.8 crore. However, the company's operating cash flow fell 60% on-year to Rs 807 crore.

Indus Towers added 1027 new towers over the previous quarter, bringing its total tower tally to 1,86,474 in the quarter ended June 30 in 22 out of 23 telecom circles in India. The company also added 591 new co-locations as compared to the June quarter, bringing the tally to 3,36,382.

However, the company's sharing revenue per tower per month declined 11.4% quarterly and 2.9% annually, to Rs 75,888. Sharing revenue per sharing operator per month also declined 11.2% quarterly, and 2% annually to Rs 41,879.
Indus attributed the decline in financials to a chunk of receivables due from one of the key customers, which analysts say, was likely to be cash-strapped Vodafone Idea. This, while the company's energy costs jumped 5.3% and operating expenses increased by 18.2%.

"Our financial performance was an outcome of our prudent accounting practice as there is stress on our receivables due to the financial position of one of our major customers," outgoing Managing Director and CEO, Bimal Dayal said in a press statement.

Indus said that the customer has informed the company that a funding plan is under finalisation with its lenders and has proposed a payment plan to the company where it has committed to pay part of the amount to be billed till the end of the year and 100% of the amount billed thereafter.

The remaining dues, it has proposed to pay between January 2023 and July 2023. The proposal is under consideration of the company, said the auditor's report by Deloitte which audited the financials of the company.

The auditor's report further states that the company had agreed to the payment plan and modification of its security arrangements proposed by one of the promoters of Vi for clearance of the outstanding dues.

Pursuant to the agreement, Vodafone has disposed of all primary pledged shares on equities issued by it to be used exclusively for clearing the outstanding dues of the company.

Further, Indus has a secondary pledge over Vodafone’s remaining shares, and a corporate guarantee provided by Vi's promoters which could be triggered, but that is, however, not adequate to cover the total outstanding dues.

Commenting on the renewed agreements, Indus said both customers have agreed to renew the co-locations for a period of 10 years, thereby ensuring long-term commitment and revenue for the company, while retaining the option of exiting up to 9% sites without exit penalty.

Although, the renewed agreements have been extended at competitive prices and terms to the customers which is "likely to result in a marginal reduction in revenue for the company with effect from April 2022 on a like-to-like basis.

However, Indus expects the incremental revenue from the demand arising from the upcoming launch of 5G services to offset the reduction in revenue.