Indus Tower: Will Indus Tower shares be able to tower over its lifetime high? Indus Tower Limited headquartered in Gurugram, Haryana is one of the largest Tower Network providers globally with close to 3500+ headcount. It was incorporated in 2007 by Bharti Infratel (Subsidiary of Bharti Airtel), Vodafone Essar, and Idea Cellular to provide shared telecom infrastructure to telecom operators on a nondiscriminatory basis.

Industry Overview of Indus Tower

From its market size of $69 billion in 2023, the global telecom tower industry is predicted to grow to $120 billion by the end of 2030. The growing need for the 5G network may be the main cause. Furthermore, the spread of telecom and internet services throughout the world’s distant regions would serve as a helpful spur for the expansion of the tower sector.

Finally, as the connection is mostly dependent on communication ease, the government’s endeavor to connect the nation’s border areas would also benefit businesses involved in infrastructure development. 

Company Overview Of Indus Tower

Indus Tower was incorporated in 2007 by Bharti Infratel, Idea Cellular, and Vodafone Essar. Initially, the primary objective of all the 3 companies was to merge their passive infrastructure assets consisting of 16 telecom circles. Additionally, the company also had plans to offer shared telecom infrastructure service to all the telecom operators present out there in the market harmoniously.

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The company boasts of having close to 200,000 towers and 3,50,000 co-locations. Apart from that, Indus Tower has the widest coverage in India with a presence in all the 22 telecom circles of the country. Some of its top clients are Jio, Vodafone Idea, Bharti Airtel, and Bharti Hexacom.

Indus Tower Company Analysis

Initial Ownership Pattern

Bharti Infratel Merger

In 2017, Vodacom Group and Vodafone Idea held a 53% share in Indus Tower, which Bharti Infratel intended to purchase. Vodafone then proceeded to give Bank of America, Merrill Lynch, and Morgan Stanley a formal mandate to search for potential purchasers in July. All of Indus Tower’s stakeholders finally agreed in April 2018 to merge Bharti Infratel with Indus Tower.

By the terms of the deal, Bharti Infratel transferred 1,565 of its shares for each share owned by Indus Tower, valuing Indus Tower at USD 10 billion. On completion of the merger BhartiAIrtel (Parent company of Bharti Infratel) had a 36.73% stake in the merged entity and Vodafone group had a 28.12 % stake. With the completion of this merger, Indus Tower emerged as the second-largest telecom tower infrastructure operator in the world.

Sale of Stake by Vodafone Group

Vodafone has chosen to sell about 18% of its stake, a significant increase from the previously decided 10%. This would assist the large telecom company in raising about $2 billion, which would be utilized to meet Vodafone Idea’s funding needs. On Wednesday, June 19, 2024, the National Stock Exchange of India announced that over 615 million shares of Indus Towers were traded through several block trades.

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Financial Highlights Of Indus Tower

Financial Year2020 (Mar)2021 (Mar)2022 (Mar)2023 (Mar)2024 (Mar)
Revenue (Crores)6,74313,95427,71728,38228,601
Net Profit (Crores)3,2993,7796,3732,0406,036
Operating Profit Margin (%)53%51%54%34%51%
Return on Capital Employed (%)23%19%25%11%20%
Earnings per share₹17.83₹14.02₹23.65₹7.57₹22.40

The company’s revenue has increased rapidly throughout the years, quadrupling from ₹6,743Cr in 2020 to ₹28,601Cr in March 2024. The company’s net profit has also increased from 3,299 Cr in 2020 to 6036 Cr in 2024, which can be linked to the government’s push for connectivity, the major telecom providers’ implementation of 5G, and India’s constantly growing smartphone market. Regardless of a setback in 2023 where, the company’s operating margins and net profit saw a dip, dropping from 54% to 34% and from 6,373Cr. to 2040Cr., respectively. The management attributed this to the company’s significant difficulties in collecting payments from one of their top clients. 

Competitors Of Indus Tower

As of now, there are no big players like Indus Tower in the Indian market, which could be a potential threat for the company. However, there are some emerging players in the domestic market like Tejas Network, Sar Televenture Limited, Anant Raj Limited, Suyog Telematics Limited, and ITI Limited.

International players like AT&T, China Tower Corporation, Crown Castle, and American Tower will act as restraints in the global space. Going forward, Indus Tower will continue to be the biggest player in the domestic market as it is one of the biggest players in the world in terms of towers installed and maintained.

Key Metrics of Competitors

MetricsTejas NetworkITI Ltd.Anant Raj
Market Capitalisation₹ 24,097 Cr.₹ 29,259 Cr.₹ 15,187 Cr.
Current Market Price₹1,423.00₹307.50₹440.00
Price to Earnings Ratio383(Not Profitable)58.2
Book Value₹ 184₹ 18.2₹ 107
Dividend Yield %0.00 %0.00 %0.16 %
ROCE3.68 %-8.44 %8.54 %
Debt to Equity Ratio0.11.030.17
Promoter Holdings55.6 %90.00%60.01%
FII Holdings11.33 %0.11%11.52%

Future Prospects Of Indus Tower

Indus Tower has an extensive presence in all telecommunication circles and with strong growth potential as data consumption and data users/devices continue to increase. Additionally, long-term contracts with leading wireless telecommunication service providers in India provide visibility on future revenues of the company. The estimated weighted average remaining life of service contracts, entered into with telecommunication service providers, as of March 31, 2024, is 6.34 Years.

Lastly, Indus Towers has started deploying lithium and VRLA together using cutting-edge HSBTS switches, which will lower the cost of diesel. Furthermore, a cutting-edge aluminum-air energy-generating solution for sites with high fuel use is assessed and scheduled for trial deployment. Besides this Indus Tower is also planning to expedite the installation of 5G towers across all its circles.

SWOT Analysis Of Indus Tower

Drivers: Going forward, the global telecom market is expected to grow due to the ever-growing demand for better connectivity, and the Asia Pacific region will be the frontrunner in the growth of this industry. This could be attributed to an increase in globalization as well as urbanization and rising investments aimed at furthering 5G connectivity across the country. This is where behemoths like Indus Tower would have an opportunity to enhance their reach further. 

Restraints: Nonetheless, Indus Tower may encounter rivalry from nascent enterprises within the domain. Furthermore, because telecom companies are the clients of tower businesses, the small telecom industry in the country is detrimental to the tower companies. This is because the potential collapse of even one telecom company could have a significant negative impact on the ability of the tower companies to conduct business.

Indus Tower Key Metrics

MetricsFigures
Market Capitalisation₹ 90,442 Cr.
Current Price₹ 336
Price to Earnings Ratio15
Price to Book Value₹ 100
Dividend Yield %0.00 %
FII Holdings16.40%
DII Holdings9.90%
Promoter Holdings68.99%

What should investors do?

Motilal Oswal: is neutral on the stock and its old target of 352 had been met. It has given a “HOLD” rating on the stock. Primary reason being, though Indus Tower stock is market leader but the stock has already run up lately.

ICICI Securities: has given a “SELL” recommendation on the stock as it believes CAPEX will continue for a few more quarters as the company is expanding its 5G network in all circles.

Conclusion

In conclusion, it will be intriguing to see the movement of the stock in the upcoming days in light of Vodafone India’s share sale. It will be interesting to see how Indus Tower manages to turn the growing tower business to its benefit as well. Will its capital expenditures meet the anticipated results?

Written By Dipangshu Kundu

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