Indus Towers - Q2 Results Review and Q&A
Overview
Indus Tower's Q2 performance showed strong collection rates and improved past dues collections, despite facing weather challenges. Tower additions remained robust, and the regulatory environment became more favorable with new policies. The company achieved significant 5G deployments, surpassing 460,000 transceiver stations. Financially, there was a 4.7% year-on-year revenue growth, with core rental revenues increasing by 8.5%. EBITDA margins also improved. Looking ahead, the company aims to leverage its strengths in passive infrastructure to meet 5G demand and sustain its market position.
Competitive dynamics and any changes in rental terms or migration of tenancies from the consolidation of the number 2 and number 3 players.
Details on the incremental rollout and loading from the company's largest customer.
An update on the notice received and the company's stance on the matter.
Evaluate the dividend payment policy at the end of the year based on the collections and cash flow situation.
Business Performance Overview
The speaker introduced the senior leadership team and reviewed the business performance for the quarter ending September 30, 2024. The company achieved full collection against monthly billing from a major customer and enhanced collections on past dues. Despite adverse weather conditions, tower additions were strong, thanks to resilient field teams maintaining network connectivity during natural disasters. Additionally, the regulatory environment has improved, facilitating telecom infrastructure deployment through supportive government measures and new regulations.
Regulatory and Operational Highlights
New rules have been introduced to support telecom projects and address industry challenges. More than 21 states have adopted the green open access policy, encouraging the use of cleaner energy sources. India has seen a significant increase in 5G-based transceiver stations, now exceeding 460,000. As demand for new sites rises, loading revenues are anticipated to grow, helping to alleviate network congestion.
Operational and Financial Performance
Power and tenancy additions remained strong, with a significant number of macro towers and co-locations added. The company achieved a leading tenancy ratio, particularly in urban areas. Financial performance for Q2 demonstrated robust growth, with total revenues and core rental revenues showing strong increases. Profitability also improved, with a notable EBITDA and net profit after tax.
ESG and CSR Initiatives
The company focused on reducing greenhouse gas emissions and increased its solar site count significantly while launching the Future Earth program. ESG training was conducted for major partners, leading to improvements in gender diversity and the introduction of a women leadership development program. CSR initiatives included distributing relief kits and expanding the digital transformation initiative to six states. Additionally, the company successfully completed a share buyback, increasing its shareholding to over 50%.
Competitive Dynamics and Renewal Discounts
There was an inquiry about the impact of tower company consolidation on the market, and it was confirmed that there have been no significant changes in competitive dynamics. A consistent framework for renewal discounts was explained, with no major lumpy renewals in the last two financial years. It was noted that tenancy growth has outpaced tower growth, indicating potential expansion from VF and BSNL rollouts. The company is positioned to capture market share effectively due to its previous tower rollouts.
Capex and Financial Performance
There were inquiries about the impact of weather on deployment reductions, with acknowledgment of the seasonal effects on energy margins. Questions about the timing of additional tenancies from a major customer confirmed that rollouts and loading activities are ongoing. Concerns regarding a GST notice were addressed, highlighting the remote risk and ongoing court proceedings. Additionally, the weaker quarters compared to historical performance were attributed to seasonality and ongoing efforts to enhance operational efficiency.
Loading and Active Equipment Deals
There were questions about the impact of loading from 4G to 5G on average revenue per tenancy, with an explanation of the offsetting factors involved. Inquiries were made regarding a recent deal with multiple vendors, confirming that there will be a time lag before tenancies start to reflect in the numbers. Questions about changes in payments from a major customer after the AGR verdict highlighted ongoing efforts to expedite road use payments. Additionally, the increase in maintenance capital expenditure was discussed, with reassurance provided about its consistent annual expenditure stability.
The progress on strategic priorities was summarized, highlighting the company's strong financial performance and ongoing rollouts. The organization remains well-positioned to capitalize on growth opportunities while prioritizing sustainability. Participants expressed their gratitude for the presentation and Q&A session as the call concluded, with wishes for a Happy Diwali shared among all.
You can listen to the full presentation on Indus Towers website here>
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