Indus Towers hits more than 8-month low due to growing issues
Indus Towers shares fell 6.5% to Rs 207.75, hitting a more than eight-month low on BSE in intraday trading on Wednesday, in an otherwise strong market amid concerns growth. The stock was trading at its lowest level since November 20, 2020. Indus’s share price underperformed the market amid concerns over the survival of its main tenant Vodafone Idea (VIL).
Indus Towers Limited (formerly Bharti Infratel Limited) is India’s leading provider of passive telecommunications infrastructure and deploys, owns and manages telecommunications towers and communications structures for various mobile operators. It caters to all wireless telecom service providers in India.
According to analysts, lower VIL penalties during FY23 should slow growth. In addition, its situation remains precarious, weighed down by soaring debt and its inability to raise funds and improve its liquidity. This remains the biggest overhang for Indus Towers as VIL is its big customer and the tower sharing business has a limited business case for single tenant operations. On the other hand, the threat of RJio’s increased concentration in the Tower Infrastructure space could weaken Indus’ positioning, brokerage firm Motilal Oswal Financial Services said in a results update.
In the past week, the stock has lost 10% following the release of financial results for the first quarter ended June 30, 2021 (T1FY22). Telecommunications infrastructure company Indus Towers posted consolidated after-tax profit of Rs 1,415 crore in the first quarter of fiscal 22, compared to Rs 1,121 crore in the same quarter a year ago.
Consolidated revenue increased 11.7% year-over-year (YoY) to Rs 6,797 crore compared to Rs 6,086 crore during the period of the previous year. Ebitda (earnings before interest, taxes, depreciation and amortization) amounted to 3,517 crore rupees, up 3% quarter-on-quarter (QoT), with EBITDA margins at 51.7% (in 83 basis points QoQ drop) due to negative energy margins.
Management said the quarter was hit by a cyclone in 13 circles, which affected operations and costs. The 25 percent increase in trade receivables in the quarter was due to timing issues, while the remainder was due to late payment by a customer. Indus has sufficient security cover for overdue amounts.
“The long-term network upgrade opportunity in the telecommunications sector to 5G, fiber, small cell and indoor coverage would continue to drive the growth of the passive telecommunications infrastructure sector. profits, ”according to a Motilal Oswal Securities analyst.
Adding leasing for a third straight quarter is decent, but future sustainability will be important, analysts at ICICI Securities said. “The key risk to VIL’s survival continues to exist and the stretched debts are the first sign of this. In addition, although opportunities in adjacent areas (ie small cells / smart cities / in building solutions / active network sharing) exist, these can only bear fruit in the long term, ”he said. they added.
At 1:40 p.m., the stock was trading down 4.7% to Rs 211.75 on BSE, compared to a rise of 0.93% for the S&P BSE Sensex. So far, 7.3 million combined shares had changed hands on the counter of NSE and ESB.