Indus Towers confident of cash flow boost in FY25

“Now that the fundraise has occurred, we expect the pending dues to be cleared by our key customer (read: Vi), and it should happen quickly, though I cannot give a timeframe,” Indus managing director Prachur Sah said on the tower company’s March quarter earnings call Wednesday.

He also declined to hazard a guess on the precise funds that Vi would tap to clear its pending backlog of dues to Indus. “We are working with the customer (Vi) on how the overdues can be cleared soon but I can’t comment on what funds it will use to pay Indus.”

Ambit Capital recently estimated Vi’s past dues to Indus at around Rs 10,000 crore.

Indus executives said the towerco had recovered additional sums beyond the 100% collection of current dues in the March quarter, which had led to some write-backs in provisions. As a result, Indus’ allowance for doubtful receivables had reduced to around Rs 5,385 crore in the March quarter, FY24, from around Rs 5,700 crore in the quarter ended December.

Vi’s chief executive Akshaya Moondra had recently told ET the telco would not use the proceeds of its just-concluded Rs 18,000 crore FPO to clear dues of any promoter or promoter group entity, alluding to Indus. He had, in fact, not given any timeline for Vi clearing its dues to Indus, saying vendor dues would be paid out of the cash flows generated by Vi from operations, going forward.

In the immediate term, Vi’s FPO is slated to be followed by a Rs 25,000-crore debt issue, helping the telco achieve its targeted Rs 45,000 crore fundraise, aimed at bolstering competition against bigger and more profitable rivals Reliance Jio and Bharti Airtel, and regaining financial health.

Indus CFO Vikas Poddar, who was present on the March quarter earnings call, said dividend payouts would be an “important consideration” and the towerco’s board would take that call in the current fiscal, given the prospect of improved cash flows once Vi clears past dues and bolsters operations.

Indus’ top deck, though, signalled that the tower company’s dividend policy remained linked to its FCF (free cash flow) position, which is likely to remain pressured by elevated capex amid aggressive tower network expansion, courtesy top customer Bharti Airtel’s aggressive 5G rollouts and rural push as well as Vi’s upcoming network expansion.

Nevertheless, Indus’ management expects a financially-stronger Vi to generate more business for the towerco in FY25, especially once the telco starts expanding its 4G network and rolls out 5G across its priority markets.

Analysts estimate that even if Vi uses a portion of the cash raised to add around 75,000 new sites to plug network gaps in priority markets, it could lead to around 40,000-45,000 tenancy additions for Indus.

Vi has already said that out of the Rs 18,000 crore just raised via the FPO, over Rs12,000 crore has been set aside for 4G expansion and 5G rollouts. Of this, Rs 5,720 crore will go towards 5G rollouts with 4G expansion being a priority for the telco.

Shares of Indus had closed 0.85% higher at Rs 354.80 on the BSE Tuesday.

Indus reported a 32% on-year jump in net profit at Rs 1853 crore in the the fiscal fourth quarter, on the back of record tower additions from Bharti Airtel’s countrywide 5G rollout and steady collections as well as improved recovery of past dues from Vi.