Q3FY23 Review: Indus Towers: Indus caught in a bind as Vi’s stress not behind

30 Jan 2023 , 10:05 AM

Indus Towers reported its maiden PAT loss in Q3, as it took Rs 27.6bn charge on exposure to Vi. The earnings call offered limited clarity on Indus’ way forward on realising receivables from Vi. With est. 40% of Indus’ tenancies from Vi, we look at a bear-case scenario, where Vi’s RMS goes down to nil vs 10% RMS assumed in the base case. This hit is partly offset by higher tower count from Bharti, though a higher proportion of single-tenancy towers would result in some deterioration in unit economics.

With ~Rs90bn of Vi’s debt maturing in the next 12 months, analysts at IIFL Capital Services believe its ability to pay off vendors like Indus would be limited; unless it succeeds in raising a significant amount of funds. Analysts cut Ebitda/PAT by ~13%/27%, as they factor in provision for doubtful debts (PDD) on an ongoing basis. If Vi were to shut down, Indus’ PAT could be ~70% lower than FY22 level. 

With Vi continuing to face challenges on fund-raising, analysts at IIFL Capital Services build in Rs16bn PDD p.a., which drives ~13% Ebitda cut. In such a scenario, Indus’ PAT may fall to ~Rs18bn vs Rs63bn seen in FY22. Thus, analysts of IIFL Capital Services downgrade Indus to REDUCE from ADD with Rs 142 Target Price.