Indus Towers hits over 6-yr high; zooms 51% in 1 month on improved outlook

Shares of Indus Towers hit an over six-year high of Rs 359.60 as they rallied 4 per cent on the BSE in Friday's intraday trade in an otherwise weak market. The stock of the telecom infrastructure company continued at its northward movement, having surged 51 per cent in the past one month, on improved business outlook. Since November 2023, it has more-than-doubled, zooming 108 per cent during the period.

Indus Towers is likely to be included in the MSCI Global Standard index in the May rebalancing. MSCI India Standard Index rebalancing announcement is scheduled on May 14, post market hours. The price cut-off date for the rebalancing could be any of the last 10 business days in the month of April, JM Financial Institutional Securities said.

Currently, Indus Towers is trading at its highest level since January 2018. The stock had hit a record high of Rs 499.65 on August 5, 2015. In comparison, the S&P BSE Sensex was down 0.54 per cent at 72,098 at 10:04 am.

Indus Towers is India's leading provider of passive telecom infrastructure and it deploys, owns, and manages telecom towers and communication structures, for various mobile operators. The company's portfolio of over 211,775 telecom towers makes it one of the largest tower infrastructure providers in the country with presence in all 22 telecom circles. Indus Towers caters to all wireless telecommunication service providers in India.

"Indus is witnessing demand for rural expansion and densification in urban areas, particularly from Bharti Airtel. The management expects the order book to remain strong for the coming quarters. Further, 5G will require tower densification once the 5G rollout is largely complete, which will give further fillip to demand. The demand setting would remain healthy for the next few quarters, led by rural expansion, densification of urban areas, and 5G rollouts," according to analysts at Emkay Global Financial Services.

Analysts at IIFL Securities, meanwhile. estimate Vodafone Idea to raise its mobile broadband location count from the current ~170k to 250k over the next two years. The brokerage firm expects Indus to garner ~80 per cent of the same, which should boost its tenancy ratio to ~1.95x from the current 1.7x.

Indus Towers would benefit from higher loading revenue and addition of a second tenant on many of its towers. The improvement in tenancy ratio would also improve unit economics of Indus’ tower portfolio. With Vodafone Idea's financials improving, the brokerage firm said it no longer builds in Rs 1,000 crore provisions for doubtful debts per annum for Indus.

IIFL Securities said its target price of the stock price has been increased to Rs 379 even before factoring in any potential realisation of overdue receivables of over Rs 6,000 crore from Vodafone Idea. The brokerage firm expects Indus Towers to reinstate dividend from FY25 as it again starts generating healthy FCF (dividend payout policy is 100 per cent of FCF).

Meanwhile, analysts at Emkay Global Financial Services believe that fund infusion by Vodafone Idea's promoter will reduce cash constraint for Vodafone Idea till H1FY26E. The brokerage firm assumes provisioning related to Vodafone Idea would gradually reduce, leading to an improvement in reported Ebitda margin for Indus Towers.