INDUSTOWER — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
As above SAMRIDHI RODHE
CORPORATE CALL PARTICIPANTS · Mr. Kunal Vora
Mr. Kunal Vora
BNP Paribas, Mumbai · Mr. Tanay Shah
Mr. Tanay Shah
Dolat Capital, Mumbai · Ms. Falguni Dutta
Ms. Falguni Dutta Jet Age Securities Private Limited, Kolkata Mr. Pranav Kshatriya
Nuvama, Mumbai · Mr. Rakesh Sethia
Mr. Rakesh Sethia
HDFC Mutual Funds, Mumbai · Mr. Ravi Agarwal
Mr. Ravi Agarwal
UTI AMC Ltd, Mumbai · Mr. Aazeb Anwarali Parbatani
Mr. Aazeb Anwarali Parbatani
Omcara Capital, Mumbai · Mr. Utkarsh Mehrotra
Mr. Utkarsh Mehrotra
Schonfeld, Singapore · Mr. Arun Prasath
Mr. Arun Prasath
Spark Capital, Chennai · Mr. Vivekanand Subbaraman
Mr. Vivekanand Subbaraman
Ambit Capital, Mumbai · PRESENTATION
PRESENTATION
Vandana – Moderator · Good afternoon, ladies and gentlemen. I am Vandana, the moderator for this conference. Welcome to the Indus Towers Limited
Good afternoon, ladies and gentlemen.
I am Vandana, the moderator for this conference.
Welcome to the Indus Towers Limited Second Quarter Ended September 30, 2022 Earnings Call.
For the duration of the presentation, all participant lines will be in the listen- only mode.
After the presentation, the question-and-answer session will be conducted for all the participants on this call.
In case of a natural disaster, the conference call will be culminated post an announcement.
Present with us on the call today is the senior leadership team of Indus Towers, Mr. Tejinder Kalra - COO, 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 now hand over the call to our first speaker of the day, Mr. Tejinder Kalra.
Thank you, and over to you, Mr. Kalra!
Tejinder S Kalra – Chief Operating Officer– Indus Towers Limited Thank you Vandana.
Good afternoon, everyone, and a very warm welcome to all of you.
Hope all of you guys had a great Diwali.
Thank you for joining us on the Earnings Call of Indus Towers for the quarter ended September 30, 2022.
Joining me today are my colleagues Mr. Vikas Poddar - CFO and Mr. Dheeraj Agarwal - Head Investor Relations.
Thank you very much Mr. Shah.
The next question comes from Ms. Falguni Dutta from Jet Age Securities Pvt.
Ltd. from Kolkata.
Ms. Dutta you may ask your question now.
Falguni Dutta – Jet Age Securities Private Limited - Kolkata I just have one basic question, the revenue that we mentioned, revenue from rentals is Rs.4,780 Crores for the quarter and the gross revenue is Rs.7,960 Crores.
What comprises the difference there?
Vikas Poddar – Chief Financial Officer– Indus Towers Limited So, basically within our gross revenue we have two sources, so one is the rental that we earn from our towers and then we also have our energy revenue which is largely coming from the pass through of the energy cost that we bill to our customers.
To make it simple for you Falguni, the difference between the two lines is the energy revenue.
Falguni Dutta – Jet Age Securities Private Limited - Kolkata So this energy revenue would mean the cost that we incur is just a breakup of the revenue between cost and the net that we get to understand it correctly.
Because the energy cost is the cost we would be incurring which we are passing on to the consumers so one is that and the other is the net rental composition if we were to understand the gross revenue breakup, is that correct?
Vikas Poddar – Chief Financial Officer– Indus Towers Limited That is right yes.
Falguni Dutta – Jet Age Securities Private Limited - Kolkata Thank you, Sir.
Thank you very much Ms. Dutta.
The next question comes from Mr. Pranav Kshatriya from Nuvama, Mumbai.
Mr. Kshatriya you may please ask your question now.
Pranav Kshatriya – Nuvama - Mumbai Hi!
Thanks for the opportunity.
I am just trying to get a sense on the realization.
So we have seen the realization coming to around Rs.41,500 or there abouts for the past two quarters, if I adjust for that one-time revenue.
Should we take this as the base revenue and
Thank you very much, Mr. Kshatriya.
The next question comes from Mr. Rakesh Sethia from HDFC Mutual Funds, Mumbai.
Mr. Sethia, you may ask your question now.
Rakesh Sethia – HDFC Mutual Funds - Mumbai Thank you for the opportunity.
Can you help us understand based on your initial discussion how large the 5G roll out order for you guys, I mean, how should one think about it, what percentage of the sites, what percentage of the co-location probably would have
Thank you very much, Mr. Sethia.
The next question comes from Mr. Ravi Agarwal from UTI AMC Ltd, Mumbai.
Mr. Agarwal, you may ask your question now.
Ravi Agarwal - UTI AMC Ltd - Mumbai Thank you for the opportunity.
My question is largely around the Vodafone and its receivables.
So I would just try to bifurcate the questions in to a couple of ways.
First is can you just tell me how much was the original total receivable from Vodafone Idea before the write-off which was taken in the first quarter, the provisions which were made in the first quarter and how much is the outstanding right now after the second quarter’s provision and what is the total receivable position still outstanding from Vodafone and what is the ageing.
So that is the first question and I will come back with the second question after this.
Vikas Poddar – Chief Financial Officer– Indus Towers Limited Ravi unfortunately we cannot disclose customer wise information so your questions regarding what is the receivable of Vodafone and how much is outstanding after the provision and ageing etc., unfortunately we would not be able to answer that in specific terms.
Ravi Agarwal - UTI AMC Ltd - Mumbai So should we expect any further write-offs because what we understand from the previous one is that no major write-off would be coming in the next quarters or largely all the write-offs have been accounted for and now this quarter even seeing a larger provision.
So how much can we expect in the second half of this fiscal.
Vikas Poddar – Chief Financial Officer – Indus Towers Limited Let me explain and this is very important point you have raised.
So I think first of all we have already shared the payment plan that we have agreed with the customer and as per the payment plan like I mentioned, and I would like to just sort of reinforce and reiterate that the payment plan also includes payment of the accumulated receivables in the seven months from January 2023 and July 2023.
So currently we are providing because there is a delay and there is an ageing issue and we are basically providing in order to hedge our balance sheet and de-risk the receivable situation, but based on the payment plan, currently we are not expecting any write-offs.
The payment plan envisages collection of the full dues and hopefully there will not be any write off involved.
Now coming to the other point within this question that you raised which is about the large provision in quarter two, I would like to explain that while from an optic perspective you see Rs.17.7 billion provision for doubtful debts, but if you recall I did explain that part of the payment that we collected were basically towards the settlement of past issues which otherwise if we had not settled that then those collections would have been applied towards the outstanding receivables and if that was the case then our provision for doubtful debts would have been much lower so the Rs.11 billion that I have mentioned which we collected towards the past dues would have been applied towards the current dues.
So to that extent, I think it is a bit technical.
The real bad debts or the real provision for bad debt needs to be looked at in conjunction with both the numbers.
Does that make it clear Ravi?
Ravi Agarwal - UTI AMC Ltd - Mumbai So the provision towards the current receivables would be at just around Rs.6.7 billion is that the number that as we work around?
Vikas Poddar – Chief Financial Officer – Indus Towers Limited Yes if you look at it that way.
Yes it would be Rs.6.7 billion if we basically take the total collections in this quarter which is certainly lower than that what we had in the previous quarter.
Ravi Agarwal - UTI AMC Ltd - Mumbai
Thank you very much Mr. Agarwal.
The next question comes Mr. Aazeb Anwarali Parbatani from Omcara Capital, Mumbai.
Aazeb Anwarali Parbatani – Omcara Capital – Mumbai Thank you for the opportunity.
My question is medium-term of the Vodafone Idea.
Firstly I want to ask that the payment plans which you have committed today which you have disclosed in the media also, as they agreed upon that means how the Vodafone Idea and how the management is giving the answers to your basically the forma which you have given to them in terms of the payment plan and secondly what percentage of revenue is basically contributed by the Vodafone Idea in your total revenue because you have stated that you are going to stop the services if they are not able to pay by the month of November or by the month of December so can you give some brief on that thing also?
Vikas Poddar – Chief Financial Officer – Indus Towers Limited So Aazeb on the first point the payment plan is basically what the customer has proposed and that payment plan was discussed in our Board and we have agreed in order to support the customer as a temporary support.
As far as the percentage of revenue is concerned, I think like I said unfortunately I am not able to disclose or share any customer specific information here so we may not be able to share what is the percentage of revenue from Vodafone and sorry could you just repeat your last question?
Aazeb Anwarali Parbatani – Omcara Capital – Mumbai My question is that what is the topline revenue which we are saying that we are not able to disclose in the call.
My next question is in terms of the dividend policy looking forward in FY2023 and FY2024 in terms of the dividend announcement because you are facing pressure from Vodafone Idea.
So how the dividend policy is going to be in FY2023?
Thank you very much Mr. Parbatani.
The next question comes from Mr. Utkarsh Mehrotra from Schonfeld, Singapore.
Mr. Mehrotra, you may ask your question now.
Utkarsh Mehrotra - Schonfeld - Singapore Thanks for the opportunity.
Just one question from my side.
So previously we had some collateral which basically helped us offsetting delay in getting the amounts from one of our three counter parties but going forward given the fact that there has been an inordinate delay and them raising capital so in a worst case scenario do we have anything similar plan going forward or how are we thinking about the worst case scenarios in case there is further delay in them raising the capital.
Thank you.
Vikas Poddar – Chief Financial Officer– Indus Towers Limited Utkarsh I think first of all regarding the security that we had, as we had shared earlier the entire security was restructured and we received the money in the quarter four of last fiscal and also in this current quarter through basically the equity injection that the promoters have done.
So we received almost Rs.37 billion in March and then some more funds in the month of July, so currently our primary pledge or the security that we had has been completely monetized and is no longer there.
Now coming to the worst case scenario like I said we are closely monitoring, we are also assessing our exposure and we will be making the right calls on the provisioning and if our ECL computation and methodology and our practices need to be tightened, we will also adopt that in this quarter depending on how things progress.
So really it is very difficult to predict what would be the scenario because that would be crystal gazing so I think to a large extent we will keep watching and by the way the significant provisions that we have made in the last two quarters have already given us a very significant hedge on our balance sheet and I think to that extent the risk is less.
Utkarsh Mehrotra - Schonfeld - Singapore Got it thank you.
Thank you very much Mr. Prasath.
We do have a follow up question from Mr. Kunal Vora from BNP Paribas, Mumbai.
Mr. Vora you may ask your question now.
Kunal Vora – BNP Paribas – Mumbai Thank you for the follow up.
So you did a booking of Rs.1100 Crores of past dues of which Rs.550 Crores pertains to energy and there is no additional cost which has come against that.
How should we look at this does it mean that the cost has already been booked in the past and the energy margins which we are looking at for the past quarter they would have been better considering this additional revenue.
Vikas Poddar - Chief Financial Officer – Indus Towers Limited Yes, so Kunal the way it works is I mean whenever we have these gaps as Tejinder and I spoke about which is the gap between what is expected and what is actual and so on, we do have these sort of deferred recognition.
We defer the revenue recognition till the gap is resolved and it had really accumulated, and we resolved this.
So certainly, I mean if we were to really go back and look at each of
Thank you very much Mr. Vora.
The last question comes from Mr. Vivekanand Subbaraman from Ambit Capital, Mumbai.
Mr. Subbaraman you may ask your question now.
Vivekanand Subbaraman – Ambit Capital - Mumbai Hi!
Thank you for the opportunity.
I have only one question when you spoke about the loading needs about 5G you mentioned that the frequencies you mentioned about 700 megahertz, you mentioned about multiple antenna requirements and power requirements.
Could you highlight the differences between 4G loading and 5G loading in the context of the revenue opportunity for you as far as 5G is concerned and why you believe that 5G will be a bigger loading opportunity for you than 4G.
Thank you.
Tejinder S Kalra – Chief Operating Officer– Indus Towers Limited See the difference between 4G and 5G in terms of the equipment or the split radios, there is none so there is a split radio when it is coming if it is coming on the 5G space.
In 5G, typically there are two types of equipments when it is in the 700 megahertz space you have separate antennas and separate radios going up similar to what you see in the 4G space.
When it is in the 3.3 gigahertz space 5G solution, you have the antenna and the radio integrated and both of them are going up on to the tower from a 5G rollout perceptive.
The power load of that equipment is little higher compared to what you see on the 4G radio side and therefore, as I said earlier, the rental revenues because loading revenue constitutes a big chunk of load and power the way it is structured from a TOCO perspective because of the higher power load of the sites the IP fee from a loading perspective is higher for 5G compared to the 4G.
I hope that answers your question.
Questions and answers
Vandana – Moderator · Good afternoon, ladies and gentlemen. I am Vandana, the moderator for this conference. Welcome to the Indus Towers Limited
Thank you very much sir.
We will now begin the question-and-answer interactive session for all the participants who are connected to the audio conference service from Airtel.
Due to time constraint, we would request if you could limit the number of questions to two to enable more participation, hence management will take only two questions per participant to ensure maximum participation.
Participants who wish to ask questions may please press “*” “1” on their touchtone enabled telephone keypad.
On pressing “*” “1” participants’ will get a chance to present their questions on a first in line basis.
To ask a question participants may please press “*” “1” now.
The first question comes from Mr. Kunal Vora from BNP Paribas from Mumbai.
Mr. Vora you may please ask your question now.
Kunal Vora – BNP Paribas - Mumbai Thanks for the opportunity.
My first question is on the dues receivables.
So, Vodafone Idea has offered convertible debentures to American Towers.
Have you considered that as an option, and how comfortable would you be in receiving payment other than cash?
Vikas Poddar – Chief Financial Officer – Indus Towers Limited