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Indus Towers Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Indus Towers Limited (INDUSTOWER) Q4 FY24 Earnings Concall

  • 5G Rollout
    • Accelerated 5G rollout by major telecom operators continued in Q4.
    • Over 435,000 5G base transceiver stations (BTS) deployed so far.
    • Large 5G rollouts added to loading revenues and drove strong growth.
    • Wider 5G adoption expected to spur demand for new sites for network decongestion.
    • Company confident in leveraging 5G opportunity given leadership in passive infrastructure space.
  • Subscriber/Data Usage Growth
    • 5G subscribers expected to grow from 131 million in 2023 to 575 million by 2026.
    • 17% of active 4G devices now capable of operating on 5G networks.
    • 5G’s contribution to total data traffic increased from 1.7% in 2022 to 15% in 2023.
    • Average data consumption per user per month for top 3 operators grew 14% YoY to 24GB.
    • Total data consumption grew 24% YoY in Q4 2023.
  • Record Tower Additions
    • Company achieved highest ever quarterly and yearly tower additions.
    • Added 7,961 macro towers and 7,909 co-locations in Q4.
    • Full year macro tower and co-location additions were 26,862 and 25,757 respectively.
    • Industry-leading tenancy ratio at 1.68.
  • Strategic Priorities
    • Focused on improving time-to-market, partner ecosystem, resource planning, product offerings.
    • Initiatives to reduce diesel consumption – energy storage, renewables, site conversion.
    • Added over 8,000 solar-powered sites in Q4 to expand renewable energy portfolio.
    • Achieved 100% collections from major customers, made some overdue collections.
  • Financial Performance
    • Q4 reported gross revenues grew 6.5% YoY to INR71.9 billion.
    • Core rental revenues grew 7.7% YoY to INR45.8 billion, aided by tower additions and 5G loading.
    • Q4 reported EBITDA up 19% YoY and 13.3% QoQ to INR41 billion.
    • EBITDA margin improved 6% YoY and 6.7% QoQ to 57%.
    • FY24 reported gross revenues up 0.8% YoY to INR286 billion.
    • FY24 reported EBITDA up 50.4% to INR146.3 billion, PAT up 3x to INR60.4 billion.
    • Collected over 100% of average monthly billing, resulting in write-back of provisions.
    • Trade receivables increased by INR4.3 billion due to timing difference in collections vs provision write-back.
    • Cumulatively provided INR5,500 crore for doubtful debt, collected INR370 crore in Q4.
  • Market Share Gains
    • Increased market share across all customers for new tower rollouts.
    • New tower rollouts primarily driven by one major customer.
    • 5G rollouts on existing towers counted as loading, not new rollouts.
  • Future Business Outlook
    • Expect momentum of strong tower additions to continue for some more quarters.
    • High capex phase likely for some time due to accelerated customer rollouts.
    • New business from Vodafone Idea post fundraise likely incremental tenancies, not new towers initially.
    • Clarity on incremental business, dues clearance expected soon after customer discussions.
  • Rental Outlook
    • Average rental per tenant (ARPT) expected to remain fairly stable.
    • Existing towers get annual rental escalations as per contract, around 2.5%.
    • New rollouts leaning towards lower rental but agile/nimble tower designs, creating some ARPT mix impact.
  • Capex Visibility
    • Strong visibility for next few quarters based on customer forecast/order book.
    • FY25 expected to be high rollout year, aiming for additions higher than FY24 levels.
    • If additions moderate to pre-FY24 run-rates, capex could see sharp 50-60% decline in H2 FY25 or FY26.
  • ARPT Outlook
    • Average rental per tenant (ARPT) expected to remain broadly stable.
    • Upward pressure from 5G loading revenues offset by downward mix impact from new lower-rental tower additions.
    • Around 8-12% of tenancies come up for renewal every year at discounted rates, creating downward pressure.
    • Renewal discounts part of framework agreed with customers in FY22.
  • Lean Tower Strategy
    • Lean tower rollouts will continue alongside macro tower rollouts to cater to different customer needs.
    • Added close to 4,500 lean towers in FY24, expect higher share going forward.
    • Lean towers suitable for dense areas requiring capacity enhancement, while macro towers better for wider coverage.
  • New Business Opportunities
    • Continue to evaluate potential new business opportunities beyond towers.
    • However, current focus remains on capturing strong tower market share growth.
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