Why Indus Towers Share Price is Falling

In June 2022, chief executive office (CEO) of Indus Towers said in an interview that the worst is over for the company after a "classic merger" and a restructuring deal with Vodafone Idea.

Little did he know that the problems were just starting to mount up for India's largest telecom-infrastructure company.

Indus Tower share price fell 23% in 2022. Shares of the company continue to fall even today. In 2023 so far, shares are down over 15%.

Let's find out probable reasons behind Indus Tower's underperformance.

Series of weak quarterly results

When a company reports weak quarterly results for consecutive quarters, it can indicate a more significant underlying problem with the company's operations or business model.

This can raise concerns among investors about the company's ability to generate consistent profits in the future.

Additionally, if the company is facing increased competition or a challenging industry environment, it may be difficult for them to improve their performance in the short term. As a result, the company's share price may continue to fall as investors become increasingly worried about the company's long-term prospects.

This is exactly what's happened with Indus Towers.

The company has reported weak results for three consecutive quarters. In the June 2022 quarter, Indus Towers reported a 66% fall in net profit, saying losses were on account of receivables due to Indus Towers from one of its major customers.

In the following quarter, i.e., July 2022 to September 2022, Indus Tower's net profit plunged 44% due to the same reason. The company did not name the customer by the way...

Here's what it said this time:

• The financial performance continued to be impacted by the collection challenges from one of the major customers of the company.

Coming to its latest results for the quarter ended December 2022, Indus Towers once again reported heavy losses to the tune of Rs 7.1 billion (bn).

This was after the 5G infrastructure company made Rs 23 bn worth provisions towards doubtful debt.

The company made provisions of Rs 17.7 bn in the September quarter and Rs 12.3 bn in the June quarter.

Series of losses

Rs m, consolidated	Dec-22	Dec-21	Change (%)	Sep-22	Sep-21	Change (%)	Jun-22	Jun-21	Change (%)
Net Sales	67,650	69,274	-2%	79,666	68,765	16%	20,187	32,188	-37%
Operating Profit	13,465	38,112	-65%	28,968	37,453	-23%	24,101	36,299	-34%
Net Profit	(7,082)	15,708	-145%	8,718	15,585	-44%	4,773	14,153	-66%

Data Source: Ace Equity

Industry experts are of the view that the major customer that Indus keeps referring to is Vodafone Idea. The company even highlighted in the filing that even though it has received the committed part payment, the customer (could be Vodafone Idea), has indicated challenges in complying with higher payment plan in future.

Owing to a series of dismal quarterly results, Indus Towers share price fell in 2022 and continued the downtrend in 2023 too.

Where Vodafone Idea fits in

Bharti Airtel and Vodafone Group Plc own significant stakes in Indus Towers.

Vodafone Idea was recently in talks with lead banks including HDFC Bank and SBI, to raise up to Rs 70 bn to clear its dues. Most of these dues are to Indus Towers.

Indus Towers recently allowed Vodafone Idea to pay pending dues in installments until July 2023, after Vodafone sought softer repayment terms.

Now the concern is Vodafone Idea has reportedly failed to repay its January 2023 installment of pending dues to Indus Towers.

More details are not out yet, but they will be out soon...as early as 3 PM today when Indus Towers' board meets to take the next course of action.

A board meeting is scheduled for 3 PM today.

Earlier, Indus Towers did mention that they will discontinue services if Vodafone fails on payments. In fact, Indus has repeatedly warned Vodafone Idea that it could lose tower access if they don't clear dues.

Future prospects of Indus Towers

Indus Towers has an established market position, with its market share increasing significantly after merger with Bharti Infratel. The company is a market leader in the segment.

The company has the highest tenancy ratio among telecom tower companies. The tenancy ratio is the number of tenants a tower holds-the higher the ratio, the better.

Going forward, growing 4G volumes and emerging technologies such as 5G, artificial intelligence, robotics, and the internet of things, will provide an opportunity for the company to expand its offerings.

It was considering last year to foray in the fiber space. The company also sees the tower network as a big fit for EV infrastructure, and even advertising in the foreseeable future.

How Indus Tower share price has performed recently

In 2023 so far, Indus Tower shares are down around 15%.

Today, the stock opened lower at Rs 162.8 against its previous close of Rs 170.5.

Indus Towers has a 52-week low of Rs 159.5 touched today and a 52-week high of Rs 269 touched on 16 February 2022.

Here's a table comparing Indus Towers with its peers.

Comparative Analysis

Company	Indus Towers	Hathway Cable	Bharti Airtel	Tata Communication	Vodafone Idea
ROE (%)	33.5	1.2	13.3	283.4	0.0
ROCE (%)	38.8	1.9	15.0	25.0	-5.3
Latest EPS (Rs)	9.2	0.6	11.1	64.4	-8.9
TTM PE (x)	18.6	26.2	70.2	20.6	0.0
TTM Price to book (x)	2.3	0.7	6.3	29.2	0.0
Dividend yield (%)	6.5	0.0	0.4	1.6	0.0

Data Source: Ace Equity

About Indus Towers

Indus Towers is one of the largest digital communications infrastructure providers in the world that enables communication for millions of people around the globe every day.

With customers like Bharti Airtel, Vodafone Idea, and Reliance Jio, the company is one of India's leading wireless telecommunications service providers by revenue.

To know more, check out its factsheet and latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...