Why Motilal Oswal sees Indus Towers' risk-reward as 'uncompelling' at CMP?

"While any potential relief for Vodafone Idea (Vi) is sentimentally positive for Indus Towers, we believe risk reward is uncompelling at the current market price," Motilal Oswal said

Motilal Oswal Financial Services sees the risk-reward “uncompelling” for Indus Towers at current levels. The brokerage has reiterated its ‘Neutral’ rating on Indus Towers, continuing its target of ₹390 per share, citing that the boost from the removal of bad debt provisions (₹31 per share net present value (NPV) impact) is largely offset by continued elevated maintenance capex.

 

“While any potential relief for Vodafone Idea (Vi) is sentimentally positive for Indus Towers, we believe risk reward is uncompelling at the current market price (bull case: ₹435; bear case: ₹345),” Motilal Oswal said. 

Key takeaway from Motilal Oswal’s interaction with senior management: 

Gaining market share; RJio and Vi tenancy outlook

According to Motilal Oswal’s interaction with senior management, Indus has been gaining share in new tower builds and benefitting from tenancy shifts from other towercos, supported by its operational efficiencies and strong network uptime. 

 

 

Management is confident of retaining most of Reliance Jio’s upcoming tenancy renewals, which account for about 12–13 per cent of revenue, as RJio is typically the second or third tenant on Indus’ sites and enjoys lower rentals via sharing discounts. Even so, the brokerage has factored in 5,000 tenancy exits in FY27 (around 10 per cent of expiring tenancies) to account for churn risk and potential renewal discounting. 

 

Indus has also captured over 70 per cent share in Vodafone Idea’s rollout over the past six quarters; while Vi’s rollouts slowed in H1FY26, management expects a pickup after the favourable adjusted gross revenue (AGR) ruling. Motilal Oswal already builds in 30,000 tenancies and 45,000 5G loadings from Vi over FY25–28.  ALSO READ | Accenture Q1 results signal steady outlook for Indian IT amid muted demand

Africa expansion

Indus’ proposed Africa foray remains at a very early stage, with investment plans yet to be finalised as teams are on the ground assessing opportunities and awaiting regulatory approvals. Management views Africa as an attractive long-term growth market, given rising data usage, improving penetration and the presence of a strong anchor tenant in Airtel Africa (AAF). Motilal Oswal notes that Indus’ scale and the Bharti group’s deep experience in African telecom should help deliver lower capital and operating costs, supporting incremental tenancy additions beyond AAF over the medium term.

Shareholder returns

On capital allocation, Motilal Oswal highlights that growth remains the key priority and that Indus will only pursue inorganic opportunities selectively in the tower space, with no intention to overpay for consolidation. Management reiterated that there is no change in its shareholder return policy or intent, and that it aims to reinstate dividends, but is waiting for greater visibility on potential relief measures for Vodafone Idea to avoid any unforeseen cashflow stress. In effect, dividend resumption is linked to clarity on Vi’s financial position and fund-raising.

AGR relief, bad-debt assumptions and earnings impact

Given the likelihood of AGR relief for Vi, Motilal Oswal has removed its earlier assumption of ₹2,000 crore in bad-debt provisions for Indus over FY27–32, which it had earlier pegged at roughly 25 per cent of Vi’s service rentals. This change makes FY27–28 Earnings before interest, tax, depreciation and amortisation (Ebitda) appear optically higher, but on an adjusted basis, the brokerage’s estimates are actually lower by about 1–2 per cent, as it has moderated tenancy growth assumptions. 

 

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