Vodafone Idea Settles Rs 300 Crore of Indus Towers Debt, Easing Financial Strains

25 Jan 2024 , 11:34 AM

Indus Towers has begun to collect its enormous past due backlog from important client Vodafone Idea (Vi).

In addition to collecting all current monthly dues from Vi, the largest telecom tower business in India has also collected an additional Rs 300 crore towards past dues. The company is optimistic that it can devise a comprehensive method to retrieve the remaining balance of past dues from the financially struggling telco.

Industry estimates put Vi’s past dues to Indus at a minimum of Rs 10,000 crore, prior to the most recent payment of Rs 300 crore.

Despite increased Vi collections, Indus’ leadership remained reticent about dividend payments, stating that any board decision could only be made by the end of FY24, following an assessment of collection trends and their implications for the tower company’s free cash flow (FCF) position.

‘We have a recovery plan for the backlog of its past dues and we are working closely with this customer (read: Vi),’ Indus managing director Prachur Sah stated during the tower company’s December quarter earnings call on Wednesday.

On the BSE on Wednesday, shares of Indus finished 5.8% higher at Rs 229.80.

Although the Rs 300 crore was collected in January 2024, according to senior Indus executives, it was recognized in the December quarter of FY24 as part of the unwinding of past dues, which led to a reversal of the provision for doubtful debt by the same amount.

The October–December net allowances for doubtful receivables dropped 52% sequentially to Rs 64.1 crore, according to Indus’ fiscal quarter earnings statement.

Indus’s inability to recover its past dues from Vi is a serious situation, as Bharti Airtel chairman Sunil Mittal recently told ET on the fringes of the World Economic Forum annual meeting in Davos. The minority shareholders of the tower company had even complained about Indus’s board’s slackness in recovering these dues.

Vi’s well-being is critical to Indus’ long-term financial viability because the telecom is a significant client that generates about 40% of the tower company’s sales. Cash-strapped Vi was not able to pay down its past due backlog between January and July 2023, as was previously anticipated.

The Indus management stated on the call that although Vi has improved collections, the tower company’s dividend policy is still directly correlated with its free cash flow (FCF) position, which is currently under pressure from high capex that increased by almost 16% consecutively to approximately Rs 2,653 crore in the midst of tower network expansion.

”Even as we focus on collecting old overdues, any future board decision on dividend payments will be determined by adequate FCF generation and regular payments from our customer (read: Vi),’ Sah stated. Indus’ free cash flows for the December quarter of FY24 were Rs 870 crore.

For the December quarter of FY24, Indus Towers announced a net profit of Rs 1,541 crore, driven by robust tower construction in tandem with key client Bharti Airtel’s continued rural push and statewide 5G roll out, consistent Vi collections, and a substantial year-over-year decline in net finance expenses. According to Indus MD Sah, the company has added record numbers of towers for the third consecutive quarter.

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