Indus Towers Limited (NSE: INDUSTOWER) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Unidentified Speaker
Vikas Poddar — Chief Financial Officer
Prachur Sah — Managing Director and Chief Executive Officer
Analysts:
Kunal Vora — Analyst
Manish Adukia — Analyst
Vivekanand S. — Analyst
Sumangal Nevatia — Analyst
Sanjesh Jain — Analyst
Arun Prasath — Analyst
Presentation:
Operator
Good afternoon, ladies and gentlemen, I’m Sunita, the moderator for this conference. Welcome to the Industava Limited Third Quarter Ended December 31 December 2024 Earnings Call. For the duration of the presentation, all participants’ line will be in the listen-only mode. After the presentation, the question-and-answer session will be conducted for all the participants on this call. In case of financial disasters, the conference call will be terminated post an announcement. Present with us on the call today is the senior leadership team of. I must remind you your call on-hold and we should stay on the line may include please stay on the line speaking with has put your call on-hold. Please stay on the line speaking with has put your call on-hold please stay on the line hold per the person you are speaking with has put your call the person you are speaking with has put your call on-hold. Please stay on the line.
Unidentified Speaker
Held by Vodafone PNC. Before I delve deeper into major business developments, I would like to take a moment to acknowledge the dedication and perseverance of our teams on-the-ground who harsh conditions and worked down the clock to ensure seamless connectivity. During the quarter, we installed towers in some of the most geographically challenging locations in the country, including, and Taman as well as Machuka and Italian in Pradesh. The field team are praiseworthy, which help in digital inclusion of people in these locations. Moving to the regulatory landscape, the government continues to take steps to help accelerate the rollout of telecom infrastructure in the country, while being cognizant of the environmental aspect. The recently-announced right-way rules 2024 have been implemented from 1st January 2025 and have to be mandatory followed by the state. The rules aim to resolve interpretational issues within the industry and ensure efficient deployment of telecom infrastructure amongst other things. The center is coordinating with all stakeholders, including state government and industry bodies to provide support for resolution of initial keeping issues. Additionally, the Green Energy Open Access policy has been notified in almost 24 states, which will be a key enabler not only for driving use of renewable energy, but also making the energy consumption more efficient. The composite scheme introduced a few quarters back has now been implemented in 11 states, including the likes of Rajasthan, Matty Pradesh and Maharashtra. The scheme can optimize the overall billing process by combining the bill for multiple connections and easing the handling of hundreds and thousands of builds. Moving on to 5G. The industry-wide total number of 5G deployed stands at almost 465,000 with over 50,000 BTS being deployed in the last calendar year. So the pace of deployment has slowed down, 5G loading contributes meaningfully to the overall loading revenue. We expect the 5G loading revenues to be gradually supplemented by a demand for new sites once a certain penetration revenue is achieved to aid the network. Given our expertise in the passive infrastructure space, we believe that we are well-placed to capitalize on these opportunities. The swift deployment of 5G infrastructure is expected to be complemented by a rapid uptake of 5G by the end-consumer as well. As per statistics mentioned in the Ericsson Mobility report. As per the report, global 5G subscriptions are expected to reach over 6.3 million by 2030, accounting for around 67% of the total subscriptions. During the September quarter, global 5G subscriptions grew by 163 million to a total of 2.1 million with 4G subscriptions falling by 69 million. In India, 5G subscriptions are expected to reach around 970 million by the end of 2030, accounting for 74% of mobile subscriptions. As per the latest report, the global 5G subscription base in India grew to 218 million at the end of Q2 FY ’25, increasing by 28 million quarter-on-quarter. Comparatively, 4G subscriptions saw a decline of 21 million. Data consumption in the country remains robust, aided by the rapid uptake of 5G and the continued upgrade from 2G to 4G. The average data consumed per user per month across the top three operators grew 13% year-on-year to 26.6 GB for the quarter ended September 2024, with the total data consumed growing 21% year-on-year. Additionally, as per Tri, 5G data consumption grew 12% quarter-on-quarter to 12.8 billion GB and contributed to 22.7% of total data in Q2 FY ’25 compared to 20.3% in Q1 FY ’25. With having data consumption and the rapid integration of 5G, the demand for passive telecom infrastructure is expected to rise continuously to add more capacity and we possess the capability to effectively cater to this increasing demand. Now moving to operational performance. We recorded a robust tower and tenancy in Q3. During the quarter, we added 4,985 macro towers and 7,583 corresponding co-locations. The total macro towers and co-locations base grew by 10.8% and 7.2% each year-on-year, standing at 34,643 and 386,819 respectively. A significant number of tenancy additions during the quarter helped our industry-leading tenancy ratio to remain stable at 1.65, which has been declining for many quarters. Addition of co-locations on towers at 132 in Q3 and the overall base increased to 11,492 co-locations. Including towers, our net co-location additions were at 7,715 in Q3 versus 4,490 in Q2. Following-on from our operational performance, I would now like to provide an update on the progress we have made in each of our four key strategic priorities, namely market-share, cost-efficiency, network of time and sustainability. Regarding market-share, we are proud to have maintained a dominant share in the business of our major customers. This has been underpinned by the digital interventions we have been taking across the value chain and continued strengthening of our partner ecosystem, which has resulted in a reduction in turnaround time for the termis side. Our effective employee incentive and recognition programs, along with regular review mechanism are also critical to our performance. Our in-building Solutions IBS portfolio continued to witness good traction and we are pleased to have recorded the highest quarterly IBS deployment in our history. We expect this momentum to continue as we continue to work towards strengthening our IBS portfolio. The resumption of the network expansion by a major customer bodes well for us. Similar to Q3, we believe that we are well-placed to capture a meaningful share of its tenancy additions in the coming quarters as well. Secondly, on operational and cost-efficiency, we are working on optimizing both operating and capital expenses. Energy account for a sizable amount of our opex and diesel cost makes up a large part of it. Our ongoing initiatives, including electrification of non-electrified sites and deployment of energy storage solutions have yielded an 8% year-on-year reduction in diesel consumption in-quarter ending Q3. We also continue to focus on increasing the share of renewable sources of energy with our solar site growing to over 28,000. We continue to optimize our rental cost through product design and negotiation strategy based on benchmarking, prioritization of sites and landlord segmentation. To manage our network cost, we are working on improving the productivity of technicians through benchmarking and optimizing their scope of work-through the use of digital intervention. On capex, we continue to transition our battery portfolio to lithium-ion batteries, which have a lower charging time and a longer life, thus providing both operating and cost efficiencies. Similarly, our tower portfolio also pivoting towards an increased share of light tower variant, which has helped us reduce our civil and product costs. Thirdly, on-network uptime, which is a very critical — which is very critical for our customers and us. We continue to maintain a very-high uptime and delivered an uptime of 19.98% in Q3 FY ’25 compared to 99.96 in Q2. Please note that the quarter was marked by severe natural committees such as Cyclone in Orissa and heavy rains and thunderstorms in areas of and Punjab amongst. Despite these challenges, our field force ensured a high-level of uptime. On the front of sustainability, which remains a key priority of organization, our initiatives towards reducing utility emissions continue to reap. We continue to work towards reducing our dependency on fossil fuels for energy needs by transitioning to renewable sources energy. Our solar portfolio stands at over 28,000 at the end of Q3. In order to expand our renewable energy portfolio, we have entered into a power purchase agreement with a strategic partner for procurement of renewable energy from a 130 megawatt solar plant under Captive mode. As part of the agreement, we would acquire 26% of the equity shares of the entity for a consideration of around INR38 crores. The sustainability practices of our partners are also important to us and we conducted EHE training of close to 100 major partners during the quarter. We also continue to work towards increasing the usage of EV vehicles for business travel. We were happy to see our efforts in the environment domain recognized being restored with the Great Indian Sustainable Performance in Energy efficiency award-wide transformance. In our workforce, our gender diversity stood at 14.2% in Q3 FY ’25 compared to 11.3% in the corresponding period last year. We continue to make efforts towards improving gender diversity across the value chain. And to this end, we launched Success program during the quarter. The program focuses on mutual sharing of human strategies, best practices and success stories with the partners to drive progress. On the CSR front, we carried out relief activities related to floods in Bihar reporting over 2,000 lives. We were pleased to see a social initiative being recognized by multiple bodies. In Q3, we won the Award 2024 for CSR Excellence and the Gold Award under Social initiative category at ChangeBaker Awards 2024. The quarter witnessed landmark decisions from the Honorable Supreme Court and Delhi High Court for resolution of the long-pending tax matters of the industry. I believe that the diseases are progressive and will support the investment in the sector. I will have Vikas share more details on this. I would now request Vikas to take you through our financial performance for the quarter ended, 31, 2024, and I look-forward to your questions. Over to you, Vikas.
Vikas Poddar — Chief Financial Officer
Thank you. Thank you, Pathur, and good afternoon, everyone. I’m pleased to share with you all the financial results for the quarter ended 31st December 2024. We are pleased to report a strong financial performance for the quarter, underpinned by substantial tower and co-location additions. Our financial performance was further supplemented by the clearance of a substantial part of overdues from a major customer. In-quarter three, total revenues grew by 4.8% year-on-year to INR75.5 billion, while the core revenues from rental grew by 7.5% year-on-year to INR48.2 billion, driven by strong tower and co-location additions. On a quarter-on-quarter basis, our reported gross revenue and core revenue from rental increased by 1.1% and 2.3% respectively. In terms of profitability, EBITDA stood at INR70 billion, growing 93% year-on-year and 43% quarter-on-quarter. EBITDA margin increased by 42.4 percentage points year-on-year and 27 percentage points quarter-on-quarter to 92.7%. Please note that during the quarter, we collected INR19.1 billion from monetization of the secondary pledge on the held by Vodafone PLC in. We also recovered an additional amount against the overdues from a major customer. This resulted in an overall write-back of provision for doubtful debt of INR30.2 billion, reducing our provision for doubtful debt to about INR5 billion. The write-back helped our overall profits and adjusted for the same, EBITDA increased by 8.3% year-on-year and 3.7% quarter-on-quarter. Our energy margins were at minus 3.4% in-quarter three compared to minus 4.8% in-quarter two. We are taking many initiatives to improve our energy margins, which includes reducing our diesel consumption and increasing the share of renewable energy to benefit from the lower-cost. Tying up with strategic partners under Green Energy Open Access and deploying solar sites are expected to optimize our overall energy cost. Our finance income increased quarter-on-quarter to INR2.1 billion on account of interest collection from a major customer on its overdues. Our income tax had a benefit of INR1.4 billion from reversal of provisions following a favorable judgment from income tax apple attribunal pertaining to past period. Our profit-after-tax grew by 160% year-on-year and 80% quarter-on-quarter to INR40 billion. Adjusted for provision write-backs, our profit-after-tax increased by 7.7% year-on-year and 9.6% quarter-on-quarter. The reported pre-tax return on capital employed and post-tax return-on-equity for the rolling-12 months stood at 29.3% and 34.8% respectively. We generated free-cash flow of INR26.6 billion in-quarter three, underpinned by higher collections. Trade receivables increased by INR16.9 billion, primarily due to the significant provision reversal against which the amount was collected subsequently in this month. During the quarter, the Honorable Supreme Court in a landmark ruling allowed Synvac credit on towers and shelters, resulting in a reduction of INR37 billion in our contingent liability. Following the Honorable Supreme Court ruling, the Delhi High Court cost the show-cause notice issued by the DGGI on the issue of disallowance of input tax credit available by the company on passive infrastructure and towers. This resulted in reduction of INR62 billion in our non-conting liability. To sum-up, we are pleased to have delivered a robust financial performance during the quarter, underpinned by substantial tower and co-location additions. The correction of a significant amount against the overdues of a major customer was another material positive and bodes well for the clearance of the balance amount. Looking ahead, we expect the ongoing network expansion of our customers to act as a key pillar of our growth. I would now request the moderator to open the floor for question-and-answers, please. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer interactive session for all the participants who are connected to audio conference service from. Due to time constraints, we would request that you could limit the number of questions to two to enable more participation. Hence, management will take only two questions per participant to ensure maximum participation. Participants who wish to ask a question may please press star one on their enabled telephone keypad. On pressing Star-1, participants will get a chance to present their questions on first-in line basis. To ask a question, participant may please press star one now the first question comes from Mr Kunal from Mumbai. MR. Kunal, you may ask your question now.
Kunal Vora
? Yeah. Thanks for the opportunity and congrats for a strong quarter. First is your co-location additions this time were much higher versus power additions. Looks like you’re getting new business from Vodapon India. So wanted to get a sense on how is the pipeline looking at both from and Industry? I know you won’t be able to share successibilities, but if you can just talk about how the pipeline looking?
Prachur Sah
No, thanks. Thanks, Kunal. I think, yes, I think your observation is correct. This was a strong quarter with both tower and co-location additions. I think — I think our order book remains quite strong both on towers and co-locations from all the customers. So I think we expect the growth to remain robust for the foreseeable future.
Kunal Vora
What’s the kind of visibility which you have right now?
Prachur Sah
You — I mean, if you are looking at a timeframe, I think we are looking at a timeframe of visibility of the next three to four quarters, that’s what we have today.
Kunal Vora
Okay. That’s helpful. Thank you. And second is, what’s the kind of investment you are looking to make in the EV charging infrastructure? Few years back, you’re investing in smart cities eventually filled out. So how different is this opportunity? If you can just give us your sense on what you’re looking at here?
Prachur Sah
Yeah. Gunal, I think EV and SmartCity are very different and it was a government-driven initiative. So I think the SmartCity was a government-driven initiative. From an EV business point-of-view, it’s too early to say on the investment. It’s very early-stage discussion that we are currently looking at. We are planning to look at or capitalize on our core strengths of managing space, power and OEM. And as we expand our discussions with the potential customers on a case-to-case basis, we will make the decisions accordingly. So I think it’s a bit early to say any numbers in that side.
Kunal Vora
Okay. But if you can just give some sense on like what is your right to win, how many sites might have any potential, what the kind of competition which is also working on this? Like you don’t like own the land, so how would the deal with landlord out? Whatever you can provide on this?
Prachur Sah
Yeah. So again, as I said, I think you know from a land acquisition perspective, it’s quite similar to what we do in the tower space, right? I think the model for space and power is quite similar to what we do for towers. Maybe some dimensioning is a bit different. And our right-to-win probably comes from the ability to manage and deliver the sites and provide a large uptight for the charges, which need to stay up when they are on the street. So our O&M practices, operation center will give us right to win. So I think that’s the broad thinking on which we have started doing some pilots. And as we progress, we will understand how big this opportunity can be for us and we’ll keep you.
Kunal Vora
But when do you think we can hear more about this?
Prachur Sah
Again, I said Konal, it’s very early stages. I mean, I can’t give you a timeframe. I think it’s something that we have started just now. So I think as things progress, we will come through.
Kunal Vora
Okay, thank you. That’s it from me. I’ll come back-in the queue.
Operator
Thank you very much, Mr Kunal. The next question comes from Mr Manush. Manish from Goldman Sachs, Mumbai. MR. Duke, in my ask your question now.
Manish Adukia
Kunal question. Now when you think about the new customer, Vodafone-Idea, which you said has started rolling out and you have a good share of those rollouts. Can you give us a sense of what your market-share with Vodafone-Idea has been in the new rollout? And is that broadly similar to the market-share you have with your number-one customer, Bharti Airtel. And is it safe to assume that majority of the rollouts and the visibility that you talked about for the next few quarters for Vodafone-Idea that is largely going to be on existing towers? And for Vodafone-Idea in particular, you don’t necessarily have to roll-out new task. So that they should largely come with — come in the form of financies. That’s my first question, please.
Prachur Sah
Thanks for the question. Again, rather than giving you a specific number of the share, what I can say is, you know, if you’ve seen the rollouts that we’ve done over the last couple of years that has put us in a prime position to have towers available for a second tenant. So I think that is a broad strategy that works out. And I think hence, we are in a full position to be able to monetize those towers, which are currently single-tenant, right? And when I was talking about the next three, four quarters, it would not just VIL market in terms of pipeline that we have. As far as building new towers for VIL or any other customer, I think it will depend on their planning and effort expansion. I think while we will not pick and choose, but I’m very confident that with the footprint now that we have for our Towers, we can largely capitalize on them coming as a second tenant, but we will make sure that their net cash banks are met one-way or the other.
Manish Adukia
Got it. Helpful. And just a second quick bookkeeping question. So after the collections from in the quarter of about INR30 billion odd in form of past dues, I know that the outstanding provision amount is about INR5 billion or thereabouts. Is that all that is remaining now as far as past deals are concerned from Vodafone-Idea or is there anything else on-top of that as well?
Vikas Poddar
Thank you. Yeah, Manish, just to clarify, the INR30 billion is the provision write-back, like I had mentioned in my commentary, a large chunk of that has been collected subsequently, but because we had the security with us, we recognized the provision write-back in-quarter three itself. As far as the INR5 billion is concerned, I just want to clarify, this INR5 billion is the — is the provision for doubtful debts that’s remaining after the write-back. Now just to give you a bit of history, we had provided two years back, some of the overdues to sort of derisk our balance sheet. And as and when we are collecting those overdues, we are writing back the provision. So the INR5 billion is what is remaining. Obviously, the overall outstanding is more than that because as we have explained in the past, we have been providing for the overdues which were beyond the credit period and already matured. So the outstanding is not INR5 billion, the outstanding — overall outstanding within the credit period plus the overdue is bigger than that.
Manish Adukia
Thank you for clarifying. All the best.
Vikas Poddar
Thank you.
Operator
Thank you very much, Mr Adukia. The next question comes from Mr Vive Kanan from Embit Capital. MR. Kanan, you may ask the question now?
Vivekanand S.
Thank you for the opportunity. So the first question that I have is on the capacity. So in any given quarter, what is the maximum number of co-locations that you are capable of rolling out? And is that going to be a constraint at all if Voda India decides to aggressively expand population coverage like it has suggested? And is there a theoretical limit in terms of, let’s say, 20,000, 30,000 colocations per quarter that your field force is capable of deploying? That’s one. Secondly, as far as the balance sheet is concerned, I see that your debt excluding these liabilities is down to only INR1,000 crore. So now that you are collecting money on-time from Vodafone as well as the company is clearing past dues with you, when can we expect the balance sheet to get more optimized and leverage to come back so that investors get amplification of returns like they do with other global tower companies. Thank you.
Prachur Sah
So let me answer the first question and then I’ll ask Vikas to answer the second question. So from a capability of colocation deployment, once you deploy a 1P tower, co-location deployment is actually very straightforward. So from a technical limit point-of-view, I think there will be no limit from our side in terms of co-location deployment, our turnaround time and our customer, right? So I think from a co-location deployment point-of-view, the technical limit of execution is not much of a constraint. I think as long as we have the first tenant available and the tower is there, co-location deployment is quite quick and it is not limited in terms of — because we have field force managing the towers that are operating anyways. So I think so that is not a constraint from our side. So now I’ll ask Nikash to asking.
Vikas Poddar
Yeah, sure. So, I think as far as the debt is concerned, clearly there is a reduction in this quarter, quarter three. And that’s a function of a good cash-flow that we’ve generated in this quarter as a result of better collections as well as our capex has — capex cash-flow has been lower. And as part of our normal cash management, we have sort of repaid some of our short-term loans, etc., et-cetera, right? So I don’t see this first of all as a very long-term situation. This is basically just part of our normal cash management. Coming to the long-term view on how the balance sheet can be optimized, clearly, we know that there is a lot of headroom. In the past, as I’ve explained, why we were not very, you know, keen about increasing debt levels was because there was a lot of uncertainty that we are facing. Now with the uncertainty reducing, I think clearly there will be more appetite. As we go along, there will be capital allocation decisions, et-cetera, that will be made in the next couple of months and quarters and that will probably improve the leverage situation and the balance sheet optimization. So I think give us a couple of months and quarters and then we will see how this goes. But currently, we are just sort of coming out of a very uncertain phase with a very good collection in the Q3, Q4 sort of a time period.
Vivekanand S.
Thank you very much for your elaborate answers and all the best.
Vikas Poddar
Thank you.
Operator
Thank you very much, Mr. The next question comes from Mr Sumangar Nivetia from Kotak Securities. MR. Nivetia, you may ask your question now.
Sumangal Nevatia
Yeah, good afternoon and thanks for the chance. My first question is on our new venture on EV charging. I appreciate it’s very early-stage, but just want to understand from a capital allocation point-of-view, what sort of hurdle rate do we look at when we evaluate and decide to pilot and then maybe eventually sign contracts on this business.
Prachur Sah
So again, to be honest, hurdle rate, I think — I mean, I think once we — once we are looking at the projects on a case-to-case basis, we are evaluating that. But I think the hurdle rate is going to be in-line with what our overall business is,?
Vikas Poddar
Yeah. Again, Sumangal, I think I just want to probably add to what said. I think broadly, we have made this announcement. It’s early-stage. Obviously, we are aspiring for, let’s say, mid to maybe somewhere in the double-digits, right? So mid to-high sort of a double-digit returns. But currently, the business scale is very small to really talk about returns because currently, we need to first develop this business and see where it goes and see the competitive situation in the market and so on. But obviously, aspirationally, the returns would be are expected to be double-digit.
Sumangal Nevatia
Yeah, understand. And since kind of doing some sort of pilot, do we have any sense on the TAM of this business, any external agencies we would have deployed before we, I mean, dip into this business?
Prachur Sah
So I think as I said, I think very early-stage. I think we are learning as we are doing. I think there are certain parts of pilot work primarily focus on technical feasibility and our abilities to deploy. So I think again, as I said, as we go-forward, we’ll learn more will.
Sumangal Nevatia
Got it. Got it. One small clarification. I don’t know if this is discussed or disconnected. On the dividends, I mean, since we are now coming out-of-the bad phase and all the debt provisions — bad debt provisions are largely behind, what should we expect with respect to dividend payout? Do we expect to get back to old days paying out almost all of free-cash flow eventually?
Vikas Poddar
Yeah. I think the cash-flow situation certainly has improved significantly compared to, you know what we were seeing in the past. So with this sort of visibility, we will certainly, you know, evaluate the whole situation at the year-end, which is just two, three months away. And I’m sure the Board will then take a call on the dividend also. We are fully aware that no dividend has been paid-in the last two years, although we did a buyback in-quarter two and distributed some cash. But clearly, by year end, you know, if you are still in a very strong cash-flow situation, I’m sure the Board will evaluate all this.
Sumangal Nevatia
Got it. Got it. Thank you and all the best.
Vikas Poddar
Thank you.
Operator
Thank you very much, Mr. The next question comes from Mr Sanjeev Jain from ICICI Securities. MR. Jain, you may ask your question now.
Sanjesh Jain
Good afternoon. Thanks for taking my question. Couple of more bookkeeping questions. I will start with them. First on the provision reversal, your note to account says that this quarter had the provision reversal of the collection of INR29 billion. In your opening statement, you suggested 30.2 billion. What is the difference between the two? So I am referring to notes to 11 C.
Vikas Poddar
Yeah yeah, hi, Sanjesh. So it’s basically the INR29 billion is the provision reversal on account of the monetization of security and also some of the past collection. And apart from that, there has been some other adjustment also. So the 29.6 billion that you see in the notes to accounts relates to one customer and a specific transaction, but in the overall books, the provision reversal has been $30 billion or thereabout. So it’s a — there are other TDS-related adjustments and so on. So the total number is INR30 billion. So that’s the small difference that we are explaining.
Sanjesh Jain
Got it. That’s clear. Second on the trade receivables, if I look at quarter-on-quarter, our trade receivables — receivables has gone from INR66 billion in last quarter-end to INR73 billion in this quarter. What has led to the sharp increase in the trade receivables?
Vikas Poddar
So in the accounting books, as we write-back the provision because the balance sheet shows the receivables net of provisions. So as we write-back the provisions, that goes and sits in the trade receivables.
Sanjesh Jain
Money was received in January and
Vikas Poddar
That’s right. That’s right. It’s just the timing issue. That’s a timing issue.
Sanjesh Jain
That’s very clear,. The next question is on the capex. We had one of the highest tenancy addition at the CapEx number was quite muted. What explains this capex?
Vikas Poddar
No, it’s just the you know the sort of procurement sort of a time-frame the obviously the procurement for the rollout that we have done were much earlier and then there is also the adjustment on account of the Supreme Court ruling wherein capitalization to the intent of $6.6 million that you’ve explained in the notes.
Sanjesh Jain
Got it, got it. And just a follow-up question on the tenancy addition. I don’t know if you can help us understand or, what is your existing run-rate market-share in the rollout? The market-share, if not the number.
Vikas Poddar
Yeah. I think as I said in my statement, I think we are currently the dominant market-share layer for all our customers that are rolling out and I think we’ll continue to do so I was we have a dominant market-share. We also have a dominant incremental market-share?
Sanjesh Jain
Yeah. That’s very clear. One last question on the EV infrastructure business. It’s our business was quite straightforward we used to get order and based on the order, we used to get the penalty or. But in case of EV, we need to choose the location and then look for a potential business out of it. And do we — are we building the expertise, are we building a different business unit for it? Because though on the base of the business, note notebook saying that business economics are very different. Will it run — will it be run by a separate team as a different PE?
Prachur Sah
Yeah. See, again, I think since there have been a few questions I’d like to clarify. See, our primary driver of the business remains the tower business, right? I think EV is early-stage. Of course, we will maintain that difference so that the tower business does not suffer. So I think it’s a separate — separate business, unit, separate team that is going to drive the business. And as you mentioned earlier, I think there are certain things which are different, especially on the market side. That is why our selection of contracts or the deals that we make with customers will be very prudent in terms of making sure that we are close to the business model that we are doing with. I think it is something that will be new to the industry as well. So we will be very cautious on that one. But it’s a separate business, yeah.
Sanjesh Jain
And also, sir, you mentioned that you have one of the highest IDS addition in this quarter. Can you help us understand how big has it become? What is the opportunity? Are we looking at it? Along with that, can you also help us understand the effort what we are doing towards building the micro cell towers. Where are we in-direct ecosystem now? I know we do mention the linear towers, but are the same as micro towers.
Prachur Sah
So let me first answer the IBS question. I think you know, like I mentioned in my speech and IBS, for — last year we focused a lot of the tower addition. This year, we put a specific effort on making sure that our team, our ways of working our processes and even the technology that we are deploying in IBS that now includes 5G, right? We put a robust team and drive behind it, and that has resulted in a very strong uptake and our ability to acquire sites for IBS even in larger cities. So I think that has been the reason behind the IBS update and I think that has proven to our customers that we can deliver, right? So we are aggressively present in this space and we’ll continue to expand. And as far as the micro sales and the lean sites are concerned, I think — but I think can correct, but it’s a little bit of a customized solution-based on what the customer is asking for any given site. And I think we have the capability to provide those customized solutions as the requirement comes.
Vikas Poddar
Yeah, pretty much right,, as you said, there are solutions required for the customer need. It could be the small three motor — three meter six-meter, nine meter kind of structures or the single one sector, two sector, depending upon their coverage requirements, that’s how the microcell structures are built-up, but pretty much we have the solutions to cater to all the needs.
Sanjesh Jain
Got it. Got it. That’s pretty much clear now. On the — on the loss we are making on the energy, that continues to remain sticky. Though the diesel proportion has been coming down and the renewable proportion is going up, but the percentage loss has been sticky. Can we expect some reduction starting FY ’26 as a percentage of energy margin losses?
Prachur Sah
Yeah. I think that’s a good question. I think see, if you see quarter-on-quarter, there is some improvement and I think there is a — there’s a lot of effort being going there. The reason sometimes you do not see the impact of, let’s say, the solar sites or something coming in because it’s a different revenue model. So the solar revenue gets captured as service revenue, not in the energy. So you may not see that impacting the energy margin per se, but it is there in-service revenue. So if you — if you bring that, the margin definitely improves. So I think overall on the energy side, while I think there is still a lot of work to be done. Some of them always remains a timing issue in terms of how the energy margin looks like. But I believe as we move forward, as we put in more-and-more efforts on renewable, I think these numbers will continue to improve.
Sanjesh Jain
Thank you. I got one last question on the rental per tenant, which has grown 0.7% sequentially, while our tenancy sharing has been improving, which should have ideally led to some dilution in the rental per tenant as the tenancy sharing goes up. So was it a timing issue and that should start showing up from Q4 or do you think the loading will still be driving this rental per tenant going up even in the ensuing quarters.
Prachur Sah
So Sanjesh, let me explain this. I mean, while as far as the ARPT metric is concerned, like we’ve explained in the past also, there are several variables and moving parts that impact this metric. But particularly referring to quarter three movement over last quarter, that’s largely — there is another element, which is basically the seasonality, right? So Q3, Q4 generally are seasonally good quarters for hours in terms of weather, the electricity availability, etc., etc. So we have better uptime, lower diesel costs and so on. And sometimes you know better uptime also translates into sort of better ARPT. So particularly for this quarter, while there are other moving parts also, but the single biggest factor is also the fact that there is a seasonality benefit.
Sanjesh Jain
Got it. Got it. But structurally, as the tenancy sharing goes up, the ARPT should slightly come down, right?
Prachur Sah
Yeah, to some extent, right, because there is always a tenancy discount that kicks-in. So ARPT logically should come down. But like I said, we cannot attribute the movement in ARPT to-single factor. There are mix of towers, there is tenancy, there is renewal discount, there is loading, there is 5G, there is seasonality. So there are several factors. So something or the other keeps playing in this little movement that we see every quarter.
Sanjesh Jain
Got it, got it. One follow the last question. In the opening remarks, you said that now the loading is catching-up and we are nearing the 5G tenancy rollout. In how many quarters do you think you’ll start seeing the 5G standalone tenancy being rollout by the operator?
Vikas Poddar
I mean, to be honest, I can’t answer that question right now. I think let’s see how the proliferation of 5G is and then we come back. It’s too early to say if you’re going to see something like that happening soon.
Prachur Sah
This is something that was driven by the data offtake at the operator end and how they want to cater to that data need. So I think it’s a little not easy to kind of predict when the 5G standalone things will be coming in, but the rollout 5G in any case has also slowed down a little bit.
Sanjesh Jain
In terms of adding more tenancy or you don’t see that happening?
Prachur Sah
Can you repeat, sorry, I missed that.
Sanjesh Jain
Will the FWA rollout by Atel? Will that help in adding more tenancies?
Prachur Sah
No, I think the 5G coverage will cover that part. I think I don’t think that FWA has got nothing to do with tenancies. It is the 5G network and the last mile reach of 5G into the homes is what FWA caters to. So they’re using the on-air capacity and FWA is the last mile element. Okay. I’m sorry, there is a queue building up, Sanjesh. So maybe we can discuss offline if there’s anything more
Sanjesh Jain
Yes, we’ll come back-in the queue. Thanks, thanks and offering me this opportunity.
Vikas Poddar
Thank you.
Operator
Thank you very much, Mr Jain. Participants who wish to ask questions, may please press so one. The next question. The next question comes from Mr Arun from Avendus Parks. MR., you may ask your question now.
Arun Prasath
For the opportunity. Good evening, everyone. So my first question is on the anchor and the characteristics of no longer a shareholder. Are they still tenant or there is any — what are the perks that the benefits that we had because of tenancy we tend to have or tend to lose because of this.
Prachur Sah
So I mean, again, if I’m to understand your question correct, I don’t think shareholders in anchor tenant have any correlation per se. I think anchor tenant is somebody who makes the tower, gives us the order of the tower and becomes the rollout. When the tower has been, that becomes the anchor tenant. So I think shareholding and anchor terrent have no correlation. So I think if you make talents for VIL, they will become the anchor terrent or Geo. So I think anchor urancy and shareholding no.
Vikas Poddar
And just to add, commercially there is no difference, that’s what you’re trying to understand
Arun Prasath
Okay so but we will be still building towers for if they request
Prachur Sah
See at the end-of-the day, we have their is a need for them to build new towers and the existing towers or co-locations do not serve the purpose, then we’ll have a look at it because we have to help them with network expansion. Of course, our primary aim is to support as much as co-location as possible but if there is a network expansion requirement we will continue.
Arun Prasath
Now that we are finally fully out-of-the bad debts and receivables issue in future if this kind of situation repeats. What do we have which can where not the things can play differently? Do we have any plan or any levers to tackle the same issues in a different manner in the future
Prachur Sah
So I think I think you are asking something which has not happened. So I can’t give you a response, but I think you know 1-2 years ago, when, when we are having the discussion, I think we were quite confident that we will be in the situation we are in today. So I think — so I think the patience has paid-off and I think we are a point where we are getting our dues collected and we are also participating in-network expansion. So as the situation comes, based on the kind of situation, the management and the Board will act accordingly and make sure the interest of the company is protected. So that’s the answer I can give you
Arun Prasath
-why I’m asking this in the past we had some kind of a security or in terms of their interest in there in our stake or shareholding pattern, which is no longer will be there. So initially we have that cushion probably going-forward we will not have. So that’s the basis behind this question. But nevertheless, because I think you are also actively pursuing the business from the BSML extension also. Is it the right understanding?
Prachur Sah
Yes. I think wherever available, we are we are serving BSML as a customer and I think we will continue to do that. I think BSL is an important customer for us.
Arun Prasath
So typically the government being government PSUs being counterparts, again, the receivable issues kind of crops up. We are seeing it in the multiple other sectors. So what kind of a framework we have to — we have to tackle these kind of a risk business to safeguard the risk and the risk coming from these future businesses. Any thoughts on that?
Prachur Sah
So I think just to give you a sense that BSL is not just future business. We actually have existing tenancies with BSL and we have been working with them for quite some time and we have an MSA under which we operate. And of course, you know the issues that come across we handle on a case-to-case basis. So it’s not — BSL is not just future business, we have existing tennis BSL and we have a relationship where we work with them to see that we get paid on-time. And I think we have seen some good progress in the last one year in this front as well.
Arun Prasath
All right. Any indication from their side how their rollouts looks like and what kind of a business you expect in terms of relatively with respect to say what owns business or versus Barclays business. Some color on that, please? Is it your fault?
Prachur Sah
No, I can — I cannot compare with the others. All I know is that BSL is active looking — actively looking to upgrade their network. So all our tenancies are getting the — wherever they’re asking, they’re providing the upgrades to 4G and wherever there is a co-location requirement, we are making sure that we are serving them. So I think that’s — and we are actively working with them to make sure that any colocation that they are offering in the market, we are there and trying to capture that market.
Arun Prasath
Okay, okay. And also regarding the investments in the energy business, not the separate one vector within the tower energy business. So-far, I think if you can broadly split the capex that we have spent in the last three years on the core business versus what we have invested in the energy that will help us in understand the magnitude of the investment we have made.
Vikas Poddar
Arun, basically, energy is also part of our core business because in the end, while we report the two revenues separately, but in the end they are one business, right? So broadly, if you’re referring to the replacement capex, as we have clarified in the past, roughly 20% of our capex goes in replacement and then roughly 5% to 10% in other things like IT and you know, a few other initiatives. But broadly, we are — we really don’t track energy because for example, if we are replacing a battery, whether that’s a replacement capex or energy capex, I mean, how do we really classify that? So we really don’t differentiate energy capex.
Arun Prasath
Okay, okay. So put it in another way. So if we are spending close to INR800 crores of maintenance capex roughly every year. So this energy capex will go into the maintenance one?
Vikas Poddar
Yeah, our replacement capex is more than INR800 crores. So any energy capex is pretty much part of the replacement runway. But I think you keep calling it energy capex, it’s not energy capex. That is required to provide energy and provide the uptime. So I don’t think we should look at it in that way, whether it’s an energy capex. I mean, providing power is our core business. So I don’t think energy capex should be looked at in that sense.
Arun Prasath
Yeah. Okay. Okay. And anything you can call-out on the investments in the renewables within this?
Prachur Sah
No, I mentioned to you, I think first of all, in the past, we have rolled-out about 28,000 solar sites. So I think that is part of the capex, upgrade capex that is there. And in future, besides solarizing the individual sites, we are looking at investment in green open access, where I mentioned in my talk that we have signed a PPA with a strategic partner of 130 megawatts at a 26% equity. So that’s the two elements I could highlight from a renewable point-of-view.
Arun Prasath
All right. Thank you. Thanks for answering all the questions. Congrats.
Vikas Poddar
Thank you,.
Operator
Thank you very much, Mr. The next question comes from Mr Roil Shah from capital, Mumbai. Shah, you may ask your question now moving to the next participants. We do have a follow-up question from Mr Vivekanand from Ambic Capital Mumbai. MR. Vivekanand, you may ask your question now.
Vivekanand S.
Thanks for the follow-up opportunity. As per the DOT, India has around 817,000 towers. Now you have 2,35,000 towers, RTS has around 250 gate hours and has 70,000. So who has the industry’s remaining towers? And are there any consolidation opportunities left in the tower space for you presently? And secondly, can you talk about the size of the revenue pools that are there in the small cells and lean tower markets compared to the current macro tower opportunity that we are foreseeing? Thank you.
Prachur Sah
Again, I’ll try to see if I can answer this question. So asking is what’s the — if there is any other major player from a tower point-of-view, one that I’m aware of, right? So I think we can look at the numbers again on both because DoT may have some numbers which are actually not reduating also, right? So I think that could play a part in that number game. But I think that was place you listed out, which seems to be correct. And your second question was that besides macro, one of the markets that we can participate in, I mean if that’s what you were implying. Yeah. So I think besides macro, as I mentioned, small cells, lean towers, lean towers, we have deployed close to 11,000 over the last couple of years. IBS portfolio is becoming stronger for us and I think we have become a supplier. We have started to become a supplier of choice for IBS for our major customer bespoke solutions as far as small cells are concerned based on customer requirements. So I think these are the three ways we are looking at-the-market outside the macro market?
Vivekanand S.
Okay. Is there any quantification possible at all-in terms of potential revenue opportunity, maybe say broad ranges like 10% of current macro opportunity, 20%, 50%. I don’t know. I’m just asking if small-cell green towers, ideas put together, can it be material for you or is it just very small and perhaps only the needle marginal?
Prachur Sah
Yeah, I think the — you know in our business where revenue is driven by the capex that is invested, right, I think these sites cost much lower than a macro tower. So when you start talking about a percentage of revenue, I don’t know what the percentage is, we can have a look. But the materiality comes from the fact what role these solutions play in the customer’s network. So I think more than revenue, I think it’s important to look how they play the role in the customers’ network and we being the solution provider to meet all their customer network demand. So I think so while in revenue, because we are in infrastructure industry and we get made on the investment that we make, the materiality may not look that good, but it’s a very critical element to provide the holistic solutions to our customers.
Vikas Poddar
Just to add, Vivek Anand, I think while explained the rationale, which is basically meeting the network solution requirements of the customer, revenue-wise, it’s not material enough to be disclosed and that is why we don’t talk about revenue numbers for each of these segments. Yeah. So it’s a small number, not really material to be talking about.
Vivekanand S.
Fair enough. No, I wasn’t just referring to the current numbers. I was thinking more from a three to five-year perspective that can this be 10% or 20% of your business on aggregate small years in three to five years?
Prachur Sah
Yeah, I think again it’s a good return business. I think and we have been participating. I think the leisure sites have a better return. But I think three to five years down the line, as the urban territory expands and the urban requirements are there, I believe these opportunities will become bigger, how big that will become, it depends on how the network expands, what are the spectrum, what are the other issues associated with that. But it’s an important element from a network point-of-view.
Vikas Poddar
So we’re going to — just to add to what Sur is saying. I think this small-cell or IBS or micro site solutions is more from a network densification and network capacity needs focus kind of solutions. As the networks mature, as the data capacity grows or higher technologies come in, there will definitely be a need of such kind of solutions, which will increase and therefore, probably over-time, it could become material. But for today, these numbers look considerably small because the macro sites are able to cater to a large part of the need of the operator. And that’s the reason why we are in this space already so that we are ready once the densification begins to happen.
Prachur Sah
But I just want to clarify, no matter how small, I think the contribution of this revenue and revenue-share from other competitors point-of-view, and that has still a significant share in this market, right? So if you look at the BS market overall, I think we still have a — we are a large player in that space.
Vivekanand S.
Anyway, okay yeah this is very helpful. Thank you for the perspective and all the well best.
Operator
At this moment, I would like to hand over the call to Mr Sa for the final remarks.
Prachur Sah
Thank you. In summary, we are pleased to have delivered strong operational performance in Q3, reaffirming our execution capabilities and customer-centric approach. Our constant engagement with a major customer has helped us collect most of the overdues and we are confident of clearing the balance. We expect the ongoing network expansion by our major customers to provide us with ample opportunities to grow. We endeavor to add this growth journey in a sustainable way and create value for all our stakeholders, including shareholders, customers and partners. Wishing you all a very happy and have a good day. Thank you.
Operator
Ladies and gentlemen, this concludes the conference call. You may now disconnect your lines. Thank you for connecting to service from and have a pleasant evening you have been dropped from the conference by the chairperson. Bye.