Even as Indus Towers is pushing Vodafone Idea to pay its past dues, the towers company management on Thursday said as far as the telecom operator is clearing its monthly bills they are comfortable with it.
Vodafone Idea is among Indus Towers’ key customer and owes the tower company over Rs 7,000 crore, according to industry estimates. While not naming the customer, the towers company made a provision for doubtful debts worth Rs 5,453.3 crore till March end pertaining to Vodafone Idea.
For Indus Towers, clearance of the past dues by Vodafone Idea as well as continuity in the monthly payments going forward is critical to generate sufficient cash flows, analysts said. “There have been some positive developments during the quarter (like) the government decided to convert interest dues (of Vodafone Idea) into equity. Given the fact that we have made collections, we are closely watching the situation and engaging with the customer…and expedite the collections for our past receivables,” said Prachur Sah, managing director and chief executive officer of Indus Towers during the post-earnings call.
Owing to delay in fundraise, Vodafone Idea could not materialise its earlier committed payment plan wherein it agreed to repay part of the monthly billing till December 2022 and the remaining dues till December 2022 between January and July 2023. The company, however, has been paying an amount equivalent to monthly billing from January 2023, Indus Towers said.
“We have seen improvement certainly from what we were collecting in the past (from Vodafone Idea) and pretty much we are in the range of 90-100% collection in this quarter,” said Vikas Poddar, chief financial officer of Indus Towers. Further, there have not been any discussions on the new payment plan related to Vodafone Idea’s past dues, Poddar added.
Owing to improvement in collections, Indus Towers’ operating free cash flows during the January-March quarter improved to Rs 1,155 crore from a negative cash flow of Rs 621 crore in the preceding quarter.Despite the improvement in the cash flows, the company said it would see the collections trend for some more time and the working capital conditions before declaring any dividends for the shareholders.
“In the working capital evaluation, there is a bit of stress that we see. We really need to see the free cash flow generation for some more to be comfortable with the situation of working capital,” Poddar said, adding the company really needs to be confident for some more quarters before coming out with any dividend plans.
Indus Towers’ revenue from operations fell marginally quarter-on-quarter (QoQ) to Rs 6,752.9 crore. The company, however reported a net profit of Rs 1,399.1 crore during the January-March quarter largely owing to a fall in provision for doubtful debts for Vodafone Idea.
Besides the financial challenges, Indus Towers continue to see a strong business opportunity from the rollout of 5G in the country, especially in the form of increased loading of equipments on the sites, demand for leaner sites, and increased data capacity from 5G.
According to the tower company, the operators are putting about 7,000 base transceiver stations of 5G per week, up from 5,000 BTS in the quarter ago. For Indus Towers, 5-10% of the growth in average revenue per tower has been coming from 5G loading.“Rural expansion by major customers and rapid rollout of 5G is extremely encouraging for Indus Towers,” Sah said.
During the January-March quarter, Indus Towers added 7,427 towers and 7,040 co-locations on a y-o-y basis. In comparison to previous quarter, the company added 3,482 towers and 3,396 co-locations. As of March end, total towers count stood at 192,874, and the number of co-locations was 342,831. The company also added 1,235 leaner tower co-locations during the quarter.
Brokerage house Jefferies has upgraded its recommendation on Indus Towers to ‘Hold’ with a revised target price of Rs 155 due to a pick-up in growth and better-than-expected free cash flow conversion. The brokerage, however, believes that cash flow pressures from Vodafone Idea could affect the towers company.