Indus Towers stock falls over 4% as BNP calls cash conservation move 'perplexing'

Time of India

2 days ago

Indus Towers
shares fell over 4% in trade on Friday, a day after the passive telecom infrastructure company announced it would conserve cash in the short term and not return it to shareholders.
In afternoon trade, Indus stock was down 4.1% at Rs 347.75 on the BSE.
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'Indus Towers' Q1FY26 results were slightly below our estimates, with rental revenue and EBITDA 1% lower than expected, while
maintenance capex
was higher. We are disappointed by the board's decision to conserve cash, attributing it to the evolving industry landscape, elevated capex, and potential inorganic growth opportunities,' brokerage BNP said in a report.
It added that the decision was 'perplexing,' as tower additions are set to moderate in FY26 and the receivables issue has been largely resolved. The brokerage lowered its FY26–28E earnings per share estimate by 2–3%, stating that "Indus is set to remain a low to moderate growth business.'
On Thursday, Indus Towers reported a 9.8% year-on-year fall in Q1 net profit to Rs 1,737 crore, driven by higher power and fuel costs, employee benefit expenses, and repair and maintenance costs. The fall came despite an Rs 88 crore write-back of provisions for doubtful receivables from
Vodafone Idea
(Vi), one of its key customers.
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The Bharti
Airtel
subsidiary posted a 9.1% year-on-year rise in revenue to Rs 8,058 crore. Rental revenue grew 10.1% YoY but was 1% below BNP's estimates.
Organic tower additions slowed from 4,300 in Q4FY25 to 2,500 in Q1FY26, as Airtel's rural expansion has largely been completed. However, management expects robust tower additions to continue through FY26.
During its earnings call, Indus said most of the backlog receivables from Vi were collected in FY25, contributing to a free cash flow of Rs 1,570 crore for the quarter ended June. Trade receivables declined by Rs 406.4 crore during the June quarter to Rs 4,361.1 crore, following Vi's repayment of Rs 88 crore in Q1FY26, said CEO Prachur Sah.
The board's decision to conserve cash was driven by the evolving industry landscape, customer stability, elevated capex, and potential inorganic growth opportunities, Sah noted. He clarified that the decision is not a change in dividend policy but a short-term measure.
'The policy requires the board to consider predefined parameters, including the company's future cash requirements, before distributing free cash,' Sah said. He added that free cash flows generated in the previous and current fiscal years will be available for dividend payments once distributions resume.
The company cited its elevated capex outlook as a key reason for conserving cash, with funds allocated toward tower growth, infrastructure replacement, and tenancy upgrades.
Indus reported maintenance capex of Rs 1,190 crore in the first half of calendar 2025, nearly matching the capex for the entire 2024. Beyond tower additions, investments are expected in solar sites, battery upgrades to lithium-ion, and more diesel generators.
'These are upgrades that incur capex but do not always increase tower count,' Sah said, adding that maintenance capex is likely to remain high for the next 3–4 years as ageing infrastructure is upgraded.