Indus Towers Limited (NSE:INDUSTOWER) Q3 FY22 Earnings Concall dated Jan. 28, 2022
Corporate Participants:
Bimal Dayal — Managing Director & Chief Financial Officer
Vikas Poddar — Chief Financial Officer
Analysts:
Sanjesh Jain — ICICI Securities — Analyst
Kunal Vora — BNP Paribas S.A. — Analyst
Ankit Sonkhiya — Oculus Capital Advisors LLP — Analyst
Pranav Kshatriya — Edelweiss Broking Limited — Analyst
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
Amanjit Singh — Oculus Capital Advisors LLP — Analyst
Presentation:
Operator
Conference is being recorded. Good afternoon, ladies and gentlemen. I’m Rajyita, the moderator for this conference. Welcome to the Indus Towers Limited Third Quarter ended December 31st, 2021 Earnings Call [Operator Instructions] Present with us on the call today, is the senior leadership team of Indus Towers, Mr. Bimal Dayal, MD and CEO; Mr. Vikas Poddar, CFO, and Mr. Dheeraj Agarwal, Head, Investor Relations.
Before I hand over the call, I must remind you, that the overview and discussions today may include certain forward-looking statements, that must be viewed in conjunction with the risks that we face.
I’ll now hand over the call to our first speaker of the day, Mr. Bimal Dayal. Thank you, and over to you, Mr. Dayal.
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you. Thank you very much, and good afternoon, everyone. Thank you for joining us on the earnings call of Indus Towers for the quarter ended December 31st, 2021. Firstly, let me wish you and your family a very Happy New Year. Joining me today are my colleagues, Vikas Poddar, CFO and Dheeraj Agarwal, Head, Investor Relations.
Looking back at 2021, I can say that we’ve made great strides in enabling connectivity. In the last quarter in line with our mission of transforming lives by enabling communications across the nation, Indus Towers installed new towers in some of the most challenging and remote locations in Himachal Pradesh and Ladakh. One of these in, the one of the Losar in Hikkim village was installed at an astonishing altitude of 4,100 meters, which has the world’s highest post office at an elevation of 4,400 meters. In fact, recently the government informed a parliamentary panel that telecom infrastructure is being upgraded in 14,708 border villages, as part of the border area development plan. Partnering with government in this effort, Indus Towers installed 10 mobile towers in some of the highest altitude locations in Ladakh, paving the way for greater mobile connectivity in the region, kudos to our brave heart field force.
On the demand side, I’m very happy yet again to report that the growth in data consumption is unabated, even at a very high base already. The growth of 51% year-on-year in data consumption in September quarter last year as reported by major operators is just remarkable. Commercial launch of 5G, as you would know, would fuel this data consumption to provide further end user enhanced experience. In a recently released report by EY, India stands the highest when it comes to smartphone data consumption, which is 14.5 GB, and this is slated to grow 2.7 times by 25 GB, 26 GB to 40 GB. I think this is an astonishing growth rates, which we are actually presenting for the demand side and no wonder, I think our demand for the infrastructure would continue to grow.
On the customers and regulatory, the industry has made some encouraging moves post the relief package by the government in September. A tariff hike of about 20% by telecom service providers in the last quarter is a step towards improving the financial health and bringing in stability to the sector. Operators have indicated to support their investment plans by generating additional cash flows. As per the latest disclosures by a major operator, its ARPU has — is already up by 6% in quarter three financial year ’22 on a quarter-on-quarter basis. Both Airtel and VIL have also opted for four year moratorium on payment of AGR and spectrum dues as part of the relief package.
The government’s intention of playing a facilitator’s role along with its reciprocation by operators is a very positive sign for maintaining a well-being of the sector, especially when the industry is preparing for 5G rollout. I must remind you of some of the conversations we’ve had in the past on this subject. One of the significant point to be brought forward in this is the state of the VIL. With government becoming stakeholder, the question of survival is addressed in the medium-term. This certainly augurs well for the industry and for us.
Now, let me touch upon a little bit on future, which is 5G. The Government of India as you would know is planning for the spectrum auctions in July this year. The operators are preparing for 5G rollout by forging partnerships, conducting trials, and exploring the use cases. At Indus Towers, we will play a central role in helping realize the transformative potential of 5G. As services are rolled out in major Indian cities, we will be the backbone across which these services are delivered. Just as the launch of 4G services heralded India’s entry into technology driven economy, 5G will unlock significant economic value in many sectors.
Globally 5G rollout and subscriptions uptake is picking up very fast. As per Ericsson Mobility Report, the global 5G subscription grew by 98 million in September quarter, as compared to 84 million in June quarter last year. It’s far ahead of increase of 48 million in 4G subscriptions in September quarter. More and more communication service providers are joining the bandwagon. By September, over 180 providers have commercially launched the services compared to 176 at the end of June. You would be aware of certain announcement, which has already been made by Airtel. I think that move is again an alignment towards what I just mentioned.
Moving on to the operational performance, I think from an operational perspective and our financial standpoint also, we’ve had a steady quarter. We added total of 2,971 co-locations with 1,286 net tower additions. Our total towers in core locations at the end of the quarter were about 1,84,748 and 3,35,106 co-locations respectively, each growing approximately by 5.3% year-on-year basis, with our industry-leading tenancy ratio, which is stable at 1.81. One thing I would like to point out is, that our reporting includes only macro-towers and the corresponding tenancies. Nonetheless, there has been an increasing trend for leaner towers and small cells. With customers’ focus on cost efficiency and upcoming 5G technology, preference for more and more innovative and leaner products is on the rise.
But…last but not the least, while we are preparing to enter this new era of connectivity, we understand that it entails a greater respect for planet and everyone in it. Sustainability has always been a key component of our strategy and to this end, we have taken steps to beef up our ESG efforts. We have now set up an ESG committee with representation from Board and ESG Management Council to drive an overall sustainability agenda of setting up ESG vision, goals and implementation plans. We plan to include global best practices, with regards to ESG in our business operations, thereby reducing our environmental footprint and creating long-term value to our stakeholders. In 2022, we will continue to expand our infrastructure and make it more resilient in tandem with sustainable practice. We will start sharing our progress on key parameters in this ESG journey in the next financial year.
I will now request Vikas to take you through our operational and financial performance for Q3 FY’22 and I look forward to your questions. Over to you, Vikas. Thank you.
Vikas Poddar — Chief Financial Officer
Thank you, Bimal and good afternoon to all the participants on this call. I’m pleased to share with you the financial results of the third quarter ended 31st December, 2021. So, we had a steady quarter three from an operational and financial standpoint. Our total towers and co-locations at the end of the quarter were up 5.3% each year-on-year, to about 184,700 towers and 335,100 co-locations.
Coming to the financial performance for the quarter, we have witnessed a steady year-on-year growth. Our gross revenues were up 2.8% year-on-year and 0.7% quarter-on-quarter to INR69.3 billion. Our core revenue from the rentals grew by about 1.9% year-on-year and 3.4% quarter-on-quarter to INR44 billion. The year-on-year growth numbers were impacted due to the higher base in the corresponding quarter of previous year, which included significant amount for previous quarters because of the alignment of accounting practices and estimates, including the exit charges. Normalized for these factors, the gross revenues and the core revenues were up 7.4% and 7.5% respectively year-on-year. As we indicated in our previous calls, the exit revenues are expected to taper off from quarter four FY’22.
Our EBITDA grew 2.7% year-on-year and 1.7% quarter-on-quarter to INR37 billion. After adjusting for the impact of higher exit revenues and accounting practices and estimates in the corresponding quarter of last year, our EBITDA was up 11.8% year-on-year, driven by revenue growth and our cost efficiency programs. The reported EBITDA margin improved by 50 basis points to 53.5% on a quarter-on-quarter basis.
Our profit after tax was significantly up 16% year-on-year and 0.8% quarter-on-quarter to INR15.7 billion. Quarter two FY’22 included approximately INR400 million of tax benefits, on account of long-term capital gain on investments. After adjusting for the impact of higher exit revenues and accounting practices and estimates in the corresponding quarter of last year, profit after tax was up 29.8% year-on-year.
Our free cash flow for the quarter remained low, mainly due to be further increase in receivables by INR16 billion. Continued delay in payment from a customer has resulted in this low-free cash generation. While we continue to monitor the situation closely, we remain positive about the gradual improvement in this area. As you know, we continue to be adequately covered by the security package and we’ll take a judicious call, as and when required.
Our pre-tax return on capital employed was up year-on-year and quarter-on-quarter to 24.5% and our post-tax return on equity was up year-on-year and quarter-on-quarter to 29.8%. Both these figures were calculated on the trailing 12 month basis.
In summary, we had a steady quarter with good financial performance, except the spike in receivables that we will continue to monitor.
So, with this, I would like to open the floor for questions-and-answers, please. Thank you.
Questions and Answers:
Operator
[Operator Instructions]
The first question comes from Mr. Sanjesh Jain from ICICI Securities, Mumbai. Mr. Jain, you may ask your question now.
Sanjesh Jain — ICICI Securities — Analyst
Good afternoon, sir. Thanks for taking my question. Few questions. First on the RPT growth quarter-on-quarter, it looks significantly strong. Can you explain what’s driving the growth in the RPT, considering that in this quarter, the incremental tenancy sharing was 1.99x, which should have resulted in a drop in the RPT, plus the unwinding of equalization, while we have seen a very strong growth in the RPT?
Vikas Poddar — Chief Financial Officer
Yeah. Sure, Sanjesh. Thank you for the question. So, of course the RPT growth, ARPT growth has been strong at about 3% quarter-on-quarter, and this is on account of various factors. So primarily, there are some non-recurring benefits coming from the billing reconciliations in this quarter and then there are some timing elements relating to things like municipal taxes, which are basically charged back to our customers. And then the third factor is also, our tenancy and loading going up. So it’s a mix of these three or four elements, Sanjesh.
Sanjesh Jain — ICICI Securities — Analyst
Got it. Got it. So we had few one-offs in this quarter, barring the tenancy and loading thing.
Vikas Poddar — Chief Financial Officer
Yes, that’s right.
Sanjesh Jain — ICICI Securities — Analyst
Yes. Yes, Vikas. The second on the leaner. You mentioned of leaner and small cells and the adoption happening. Can you just explain what is the business model in the leaner towers or in the small cell? What is the tenancy sharing in that, if at all possible in that business and what kind of economics are we seeing in that part of the business?
Bimal Dayal — Managing Director & Chief Financial Officer
So, thanks Sanjesh for the question. We’ve been actually talking about a shift in our profile of these towers and we’ve always said that as we enter into the higher spectrum, we will — and the densification in the future, we’ve got to see a different profile of towers rather than the heavy and traditional macro ones. As things were progressing, I think we were seeing very small numbers, but we’ve lately — we’ve actually started to see these numbers grow.
Now, we are talking about two types of towers. One is, traditionally the small cells and second are, some amount of leaner sites. Now, leaner sites are low-cost sites. They are shareable, as well as come in of various variants as well. Now, if you are interested in, let’s say the profile or return profile of these sites, if I compare it with a single-tenant macro, I think our profitability on these sites is way better than what we used to have in our macro environment. I think costing of these sites is also fairly favorable, both, to us and to our customers as well. And I think I would certainly call it as an innovation, which is probably leading to adoption of these kinds of sites as well.
I think we would certainly keep an eye on the volume of these sites and as the volume grows, we may think of having a separate reporting of these sites, so that there is a clarity, which you all have, because I think the market share would be calculated with these sites in place.
Sanjesh Jain — ICICI Securities — Analyst
So we count these sites in our tenancy and tower?
Bimal Dayal — Managing Director & Chief Financial Officer
No, we don’t.
Sanjesh Jain — ICICI Securities — Analyst
So, even the leaner, because they looks like more of a smaller version of a macro tower.
Bimal Dayal — Managing Director & Chief Financial Officer
So, these could be N number of these sites equal to a macro tower and I think that N needs to be kind of stabilized and figured out as well. I think, as I mentioned, as these numbers grow, we will certainly take a decision to give you more transparency on both, N, which is equivalence of the macro site and also, the numbers of it as well.
Sanjesh Jain — ICICI Securities — Analyst
Thanks. Thanks very much for that. Just one follow-up on that. Is this the reason why we are seeing slow down in the tower addition and tenancy addition?
Bimal Dayal — Managing Director & Chief Financial Officer
Well, if you actually add these numbers up as well, we will still be short off the total number as well, but the short by a whisker. So, you may like to say that the shortage, if we add those numbers, we might be neck-to-neck as well.
But I would like to answer your question on slowing of this in a slightly different manner. I think one thing is very clear, which I made it clear through some outside end reports as well, that the demand side within this industry is unabated. Okay. As the operators and I would say, some of the other verticals within our industry make and strike these alliances for 5G, it augurs very well. The demand side is certainly very robust at the moment and will be even more robust going forward as well. We are talking about 2.7 times by ’25, ’26 as well.
So, overall demand side is good. Tower demand will continue and I will say for two reasons, one of course, densification, as well as 4G and 5G go deeper as well, we will need towers. One or two let’s say softer quarters, I won’t kind of read too much into it as well, because if I actually start to compare year-to-date as well, we are doing much better this year on an overall basis, than the CAGR of couple of years back as well. So I won’t read too much into saying that there is a slowdown here.
There is one more reason, which I would like to actually direct you towards and you could possibly derive your own answers here as well, that there is a sizable delta variance between the operators’ points of presence as well. So if there are three large players or four large players in the market, please look at what kind of delta the second player sits with and the third player sits with. And that catching up, any case has to be done as well. And I don’t think there is anybody who believes that catching up will not happen. And if anybody has an aspiration to really grab more subscribers and provide a good subscriber experience, this delta will come to the table as well.
So my take is, I don’t think I would read too much on the demand side. Demand side is robust. One or two softer quarters on this rollout cannot be sort of looked at it from a wide brush. Thank you, Sanjesh.
Sanjesh Jain — ICICI Securities — Analyst
No will… Thanks. Thanks for that answer. Just one thing, and a small observation from my side and may not be a trend but this is a first quarter, we have seen quite slower addition on the 4G side, data volume growth has been muted if we look at across the two operators who have already announced the result. At least, on the 4G side, it looks like we are hitting the more normalized growth rate versus earlier a significant glitch stronger growth rate. On the other side, the two major operators have bought a large amount of spectrum, which they need to sweat it out. It looks like the slowdown may remain for few more quarters, if before we see any major rollout from this operator, but yeah, point taken the number two and number three has to catch up in terms of footprint from where number one is today.
Bimal Dayal — Managing Director & Chief Financial Officer
Yeah. I think Sanjesh, we need to look at it in a long-term. As I said a quarter or two here and there, I don’t think I would try and make it a trend. I think when we are looking at, we should be looking at little bit longer term and say whether there is growth, I think I can easily say, eyes shut, we will see many more — requirement of many more locations from our customers and that’s what is of way clear fact. Thank you.
Sanjesh Jain — ICICI Securities — Analyst
Thanks. Thanks. Just one last from my side. Your discussion with the operators, do you feel that they are also in the planning stage to more cover the footprint gap versus the competition? Do you get that sense and how fast do they want to do that? If you can give some understanding, then it will be very helpful.
Bimal Dayal — Managing Director & Chief Financial Officer
Sanjesh, I don’t think I can delve deep into our customer discussions here as well. At this moment, I can only direct you towards a very clear surrogate here. If anybody wants to have a good customer experience and compete in the marketplace, remain relevant, I think it’s foregone conclusion as well. Hence, I would only repeat myself and say, if you are putting in surrogates for demand, I think demand is certainly out there. Will get even more bumped up when we rollout newer technologies that has 5G. Thank you.
Sanjesh Jain — ICICI Securities — Analyst
Thank you, sir. Thank you. Thank you for taking my question and best of luck for coming quarters.
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you.
Operator
Thank you very much, Mr. Jain. The next question comes from Mr. Kunal Vora from BNP Paribas, Mumbai. Mr. Vora, you may ask your question now.
Kunal Vora — BNP Paribas S.A. — Analyst
Yeah. Thanks a lot. First question on tower contract renewal. Can you just update us on both the status? Have you signed any renewals and if that is the case, at what rate? And how should we look at FY’23 rental revenue, considering that there are large contracts coming up for renewal?
Bimal Dayal — Managing Director & Chief Financial Officer
So, thank you, Kunal for asking this question. If we had signed this contract, we will certainly share this with you. Let me back off a little and I answered this question, last time. So I will pick up my answer from where we left. I think we are in intense negotiations with our customers, no doubt. When it comes to the parameters, each and every parameter is being discussed from both ends, be it tenor, be it discounts, etc. I did mention even last time as well, that our position is fairly strong. Our track record here is to certainly create a win-win both sides as well. And all I can say is, I think, please wait for the outcome of these negotiations as well. We have made progress since the last time we met, but we have not concluded.
So, I would only recommend that, please, watch this space. The moment this concludes, we will certainly come back to you. These are tough, hard drawn negotiations, which will create a long-term value for the company and hence we are taking it extremely, extremely seriously and at top priority.
Kunal Vora — BNP Paribas S.A. — Analyst
Sure. When do you expect to conclude these negotiations? And considering that one of your tenants is having financial difficulties and it’s also reflecting in your receivables, I mean should we expect that rentals will be lower for FY’23? Average rental?
Bimal Dayal — Managing Director & Chief Financial Officer
Well, it would be — maybe put it this way, let me first answer your first question. Ideally, the contracts end by 31st of March, 1st of April. The newer contracts will have to be near to as well and that is what all of us are targeting. When I say us, it is us along with our customers as well and no one wants to create an anomaly out there as well. What kind of discounts, what kind of benefits for Indus as a win-win, we will end up with, it could be anybody’s guess at the moment. So, I won’t jeopardize any negotiation position from Indus, giving you any number here as well.
My submission is, these are intense negotiations and just watch this space for some more time. We just want to subscribe you to some more patience here.
Kunal Vora — BNP Paribas S.A. — Analyst
Sure. I understand. Second is, if you can help us quantify the contribution from one-off factors in revenue this quarter. You mentioned a couple of factors, but if you can help us quantify that?
Bimal Dayal — Managing Director & Chief Financial Officer
Sorry, I couldn’t get your question. Could you repeat that?
Kunal Vora — BNP Paribas S.A. — Analyst
The one-off factors in revenue. So, revenue is up 3.4% quarter-on-quarter. I believe there is a one-off element. So, if you can help us quantify that.
Bimal Dayal — Managing Director & Chief Financial Officer
Okay. So you’re talking about one-off elements in our revenue this quarter. Maybe, Vikas can answer.
Kunal Vora — BNP Paribas S.A. — Analyst
This quarter. This quarter. Yes.
Vikas Poddar — Chief Financial Officer
Yeah. So, I think the one-off revenue would be probably circa 1% I would say, and the rest is basically normal business growth, driven by the loading, the tenancy growth, etc.
Kunal Vora — BNP Paribas S.A. — Analyst
Sure. Okay. And just lastly, if you can share capex outlook for FY’23? FY’22, we have seen capex well below FY’21. I understand that it’s a factor of towers and business growth, but if you can share any thoughts on capex?
Bimal Dayal — Managing Director & Chief Financial Officer
So we…
Vikas Poddar — Chief Financial Officer
Could you repeat, Kunal? Your voice was not very clear.
Kunal Vora — BNP Paribas S.A. — Analyst
Sorry. I was just wondering, the capex guidance or any view on capex in FY’23?
Vikas Poddar — Chief Financial Officer
So, unfortunately, we don’t really give any forward-looking view, Kunal. So we will not be able to share anything about FY’23 and in any case, we are yet to finalize the FY’23 plan. So…
Kunal Vora — BNP Paribas S.A. — Analyst
Understood. That’s it from my side. Thank you, sir.
Vikas Poddar — Chief Financial Officer
Thank you, Kunal.
Operator
Thank you very much, Mr. Vora. The next question comes from Mr. Ankit from Oculus Capital, Mumbai. Mr. Ankit, you may ask your question now.
Ankit Sonkhiya — Oculus Capital Advisors LLP — Analyst
Thanks for the opportunity, sir. My question was basically the same, regarding the contracts renewal and how we are looking at 2023, because these contract renewals will basically decide the trajectory of our revenues. I think that question is already been asked.
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you. Thank you, Ankit. We are working on it.
Ankit Sonkhiya — Oculus Capital Advisors LLP — Analyst
Thanks.
Operator
Thank you very much, Mr. Ankit. The next question comes from Mr. Pranav Kshatriya from Edelweiss, Mumbai. Mr. Kshatriya, you may ask your question now.
Pranav Kshatriya — Edelweiss Broking Limited — Analyst
Thanks for the opportunity. My question is basically a follow-up to a previous question. You talked about profitability of the smaller cells, to be in line with a single-tenancy macro tower. But single tenancy macro tower basically starts barely the cost of capital. So, if I compare the profitability of a small tower or a leaner tower to a two tenancy tower, then how does it stand and is the return profile, considering it will have a lower tenancy, is it similar, if you can comment on that?
And my second question is the — a lot of companies have started their 5G trials and I’m sure that Indus Towers would also be involved in that. Do you see any incremental role in those companies’ 5G rollout per se, any new business model emerging either on the fiber side or tower sharing side, anything you think are possibilities? Thank you.
Bimal Dayal — Managing Director & Chief Financial Officer
Thanks, Pranav. So, let me answer or clarify on the profitability of the leaner sites as well, and when I compared the profitability, I compared macro single tenant, the profitability of these leaner sites and I felt, it is better than the macro. Now, leaner sites as such as a concept is having lots of variability when we go out in the marketplace and install this as well. And that’s why, putting a finger right now and saying where this profitability would be, I think when substantial numbers come in, we can actually put our finger and get some averages going as well. Why I’m saying this is, you can acquire a rooftop and build a site, which is a simple pole and infrastructure out there. Come second tenant, we can either share the infrastructure or just bring up another pole on top of it and use the electronics. All such variants and combinations are actually in play at the moment and as we get some averaged out numbers, I think we can actually get into our reporting and sharing of those as well.
So, I think we are reaching some. When we reach some amount of threshold here, we can share those numbers with you as well. Where we stand, I think a lot of work has been done on the cost side of it and obviously, the customers have also participated in evolving this product or these products as well. And I don’t see, I would say the return profiles on an overall basis would be dilutive. However, we will keep on monitoring and sharing this with you. Only thing I can say is, what we used to build as a single tenant macro site, I think our return profile on this is way, way better than what we used to do earlier.
The second question was on 5G trials. Yes, in fact, I shared some of the 5G trials which we have been having with pretty much all the customers and in various towns. I think there is much more than even trials, which have been going on, including identification and even preparation of some of the sites in some key markets as well, depending on from customer to customer as well, and we are actually playing a major role at the moment to enable these sites or prepare these sites for 5G. We’ve also said in the past as well that the initial rollout of 5G will take place on our existing networks as we saw in case of 4G and subsequently the densification will happen as well. Now, if you actually look at 5G on existing sites, equals the loading opportunity and I think this loading opportunity will also vary from customer to customer, depending on what kind of equipment they bring, including power and the space and on the tower as well, and I think those are the things which are being finalized at the moment.
So yes, a lot is going on. If your question was, can we do more within the 5G domain, answer is yes. Will share with you as time passes by. At the moment, I don’t think I can go beyond this good.
Pranav Kshatriya — Edelweiss Broking Limited — Analyst
Sure. That is really helpful. And if I can just ask a follow-up based on that, I mean based on whatever discussions you are having, do you think that from a capital allocation perspective, if this 5G requires more capital, would you be considering anything on the dividend policy or buyback because of that? I mean how should we see return of capital from Indus, considering leverage has a fair bit of room currently?
Bimal Dayal — Managing Director & Chief Financial Officer
So…Vikas, do you want to take this?
Vikas Poddar — Chief Financial Officer
Yeah. Sure. Pranav, I think the dividend policy of the company remains linked to the cash flow and currently we are not expecting any change in that. Now, if I understand your question right, you’re basically trying to understand that if 5G entails higher capex, will that have any implication on the dividend policy? So, first of all to answer that question, I think 5G — how the 5G is going to evolve is something that needs to be seen. We really don’t expect at least in the initial years of 5G to have a large impact on our capex. Our capex pretty much will remain within the sort of envelope that we are and from that perspective, I think we will certainly look at a very stable dividend policy, which will continue to be linked to the cash flow. So I really don’t see any major impact on account of 5G capex.
Pranav Kshatriya — Edelweiss Broking Limited — Analyst
Sure. Thank you so much, sir. That’s it from my side. Really appreciate that.
Vikas Poddar — Chief Financial Officer
Thank you, Pranav.
Operator
Thank you very much, Mr. Kshatriya. The next question comes from Mr. Arun Prasath from Spark Capital, Chennai. Mr. Prasath, you may ask your question now.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
Thank you. Thank you for the opportunity. Sir, my question is on receivables. We are seeing the receivables going up. Every quarter there is a sequential increase in the receivables. Where do you see this number kicking it off and probably will see the reversal of the receivables? Is there any plan for this? Can you give some little bit more color on this line item?
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you. Thank you, Arun for this question. I will request Vikas to take it and then I will add something to it.
Vikas Poddar — Chief Financial Officer
Sure, Bimal. So I think, yeah, I mean you’re right, Arun. I think the receivables has been going up and certainly we are watching the situation very closely. However, at the same time, we remain positive about a gradual improvement in this area. I mean if you look at the — some of the positive development that has happened in the sector over the last three, four months. I mean there has been a relief package, which gives us much more certainty on the continuity of the player. There is a tariff hike in the sector. There is also a release of the substantial amount of bank guarantee, which basically will release the liquidity in the sector. The customer has also announced its plan to close its fund raised by March 2022. So overall, we continue to be adequately covered and we are actively engaging with the customer to arrive at a mutually acceptable arrangement and we believe the overall situation will see certainly some gradual improvement, but it’s very difficult to really put a hand on timing, when that will happen, but certainly it will gradually improve, is what we know. BImal, if you want to add anything.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
So, is this the peak receivables? From here only it can go down? Is it what we are implying, because now the liquidity package has been given from here. The customer’s liquidity position also can only increase from here. Are we saying that we are at the peak receivables?
Bimal Dayal — Managing Director & Chief Financial Officer
Well, look, Arun, let me give you a little bit of a different perspective on the receivables. I think if you go back in time, we have been servicing — serving these customers for north of 12,13 years as well. And I think these problems actually started maybe 2 years, 2.5 years back and obviously I think it is gotten vitiated in last one year or so as well. Now, having this security package gives us a way to work with some of these stressed customers and you know the option we have is on invocation, which is not necessarily a right option at the moment to go towards, provided, I think the customers who are actually willing to work with us. We are actually in constant discussions with the customers and we had — we thought that we would come up with some kind of a workable solution between both, the customers and us before this meeting. We are very hopeful that we could actually bring some kind of a closure to this receivable situation sooner than later. However, I cannot comment that we have seen the peak at the moment but the endeavor was to end all this, let’s say, before this Board meeting or before this close of the quarter, just that whole thing has spilled over. So as I say, watch this space, we will revert you where these receivables would be. Just that, both, the customers and us are working feverishly to bring these down.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
The question is, the customers’ cash generation ability may go up, but there is two ways they can spend that. Either they spend it on the further capex to improve the coverage or they pay the creditors like Indus Towers and they clear the balance. It seems like they would rather spend on capex, rather than paying the liability towards a service provider like you. So, is it the way of the compromise because we are compromising between collecting the current revenue versus creating a room for the future revenue? Is it the dilemma that that the company is currently…?
Bimal Dayal — Managing Director & Chief Financial Officer
Well, Arun, I think when it comes to the customers, there is always a dilemma. I think when I look at it from a distance. I think we should be happy about that we have a security package and we can walk up to the bank any time. Now, obviously if we can bring a win-win here as well and as I said we were very close to possibly coming to a conclusion with our customer as well. This is spilled over. All I can say is, just watch this space for now and obviously we’ll work out. You are right, however, there could be many more things that can be worked out along with the customers as well. So good news is, I think there is a good cooperation going on between the customer and us. So, just watch this space. We are addressing this along with the customer.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
Okay. Thank you, sir. Just final question on this receivables. At what point you will be encashing the pledge, the primary pledge? Is there any clarity on this?
Bimal Dayal — Managing Director & Chief Financial Officer
Arun, this is a difficult one. We are talking about customers and we are actually talking about something which is with us. It is our right to invoke it as well. However, I think, in conjunction with the Board and the discussions with pretty much all the related parties, we will certainly invoke it as and when needed. As I said, there is a good discussion which is going on right now with the customers and I do believe that we can come up with some kind of a win-win here as well and address the mounting receivable situation. Just watch this space for now. If not, I think we can walk to the bank anytime.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
All right. Thank you. Sir, my second question is on the leaner tower structures that we are talking about. Not exactly, technically, is it a rooftop pole or simply a set of electronics mounted on some wall. What exactly, can you just explain it little bit more on how — what exactly is this leaner structure?
Bimal Dayal — Managing Director & Chief Financial Officer
Arun, I think, please look at it this way, that when we started to make towers, we had multiple operators and gradually, I think we have now, are looking into, let’s say four operators scenario, it is three plus one. Now, not only the number of operators have kind of gotten consolidated, the spectrum in which the new rollouts will take place have also gone higher and 5G, as you would know, is 3.3 GHz, so on and so forth. So, the requirement of load on these towers has considerably come down, the power consumption of these towers has considerably come down, and hence, we can play around with type of towers.
And second, I think the requirement of height, which used to be a very big deal in 2G or even in 3G has come down with fiberization as well. We are actually seeing the requirement of even microwave is coming down as well and there are newer solutions on backhaul, which are coming in as well. Looking at this, the operators’ requirement of type of sites has changed as well. The size of GSM antenna has also reduced with 4G, and it will go down with 5G as well. So these are very, very lean structure popping out of a rooftop as well, which can even accommodate one microwave and fewer of the GSM antennas with let’s say, power back up, which is absolutely requisite there as well.
Now there are variants here as well and that’s why I will refrain from what Kilowatt, what height, etc., but suffice to say that this is a fairly lean structure and the entire product is also having a few variants as well. You will probably see them all across your town now and it could be on the floor of the roof or it could even manifest itself as a pole on the facade as well, and one operator will be on the one pole and it could be the next operator coming in with a very similar additional pole on the same rooftop as well. So those are the leaner sites, which we are talking about at the moment.
Arun Prasath — Spark Capital Advisors India Pvt Ltd — Analyst
Fair enough, sir. Very, very clear. Thank you. Thank you for the time.
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you, Arun. Thank you very much, Mr. Prasath. The next question comes from Amanjit Singh from Oculus Capital, Mumbai. Mr. Singh, you may ask your question now.
Amanjit Singh — Oculus Capital Advisors LLP — Analyst
My question is already answered. Thank you.
Operator
Thank you very much, Mr. Singh. [Operator Instructions]. At this moment, there are no further questions from participants.
I will now hand over the call proceedings to Mr. Bimal Dayal for the final remarks.
Bimal Dayal — Managing Director & Chief Financial Officer
Thank you. Thank you very much. Thank you for your questions. Looking ahead, I’m seeing great reason for optimism. The tenancy outlook is positive, given the developments towards improvement in the financial health of major players and upcoming 5G rollout. With our focus in place to leverage growth opportunities in the tower infrastructure, adjacencies and other business verticals, we are very optimistic and excited about achieving greater heights and exploring new space. I will reiterate our increased focus and efforts on driving a sustainable long-term growth with the formal structure in place now to work in this direction. Thank you all for joining the call. Stay safe. Thank you.
Vikas Poddar — Chief Financial Officer
Thank you.
Operator
[Operator Closing Remarks]