INDUSTOWER — earnings call
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Prepared remarks
CONFERENCE CALL PARTICIPANTS · Mr. Vivekanand Subbaraman
Mr. Vivekanand Subbaraman
Ambit Pvt Ltd/Mumbai · Mr. Sanjesh Jain
Mr. Sanjesh Jain
ICICI Securities/Mumbai · Mr. Sanket Baheti
Mr. Sanket Baheti
GeeCee Holdings/Mumbai · PRESENTATION
PRESENTATION
Sunita - Moderator · Good afternoon ladies and gentlemen, I am Sunita, the moderator for this conference. Welcome to the Indus Tower Limited Second
Good afternoon ladies and gentlemen, I am Sunita, the moderator for this conference.
Welcome to the Indus Tower Limited Second Quarter Ended September 30, 2023, 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 terminated post an announcement.
Present with us on the call today is the senior leadership team of Indus Towers.
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. Prachur Sah, MD & CEO.
Thank you and over to you Mr. Sah!
Mr. Prachur Sah - MD & CEO- Indus Towers Limited Thank you and a very warm welcome to all participants.
Joining me today are my colleagues, Mr. Vikas Poddar, CFO; Mr. Tejinder Kalra, COO and Mr. Dheeraj Agarwal, Head Investor Relations on the call.
I am pleased to present our business performance for the quarter ended September 30, 2023.
To begin with, we are pleased to have further built upon our strong operational performance in the previous quarters.
Driven by robust demand from one of our major customers, particularly in rural areas, our tower additions during Q2 were the highest ever.
On the collection front from one of our major customers, it continued in Q2 as well.
Before going into detail about the key aspects of our business, I would like to express gratitude to our teams on the ground for their commitment and dedication towards helping Indus Towers drive digital inclusivity for all.
During the quarter our team of bravehearts installed solar-powered towers in the Siachen base camp, which at an altitude of 17,000 feet above sea level, is one of the most remote and isolated regions in the country.
The team is also actively facilitating the rapid tower additions in the underpenetrated areas of rural India by one of our major customers, thereby enabling connectivity for all.
The Government is also doing its bit to enhance connectivity in remote areas by working towards improving the backhaul infrastructure in these areas.
The Government remains steadfast in its commitment to facilitate the swift rollout of telecom infrastructure across the nation, while keeping sustainability in view.
To this end, the Ministry of Power has notified the Green Open Access Policy and a few states have already adopted the same with minor amendments.
The Government is also engaged in discussions with multiple stakeholders for faster implementation of Green Open Access at the ground level.
These steps aimed at incentivizing the use of cleaner sources of energy, reiterate the Government's focus on infrastructure expansion in a sustainable way.
With regards to 5G, rollouts by the top two operators continue to progress at swift pace with these operators now catering to over 50 million 5G customers each.
The total number of 5G base transceiver stations or BTS deployed stands at almost 340,000 with more
Thank you, Mr. Subbaraman.
Next question comes from Mr. Sanjesh Jain from ICICI Securities, Mumbai.
Mr. Jain, you may ask your question now.
Mr. Sanjesh Jain - ICICI Securities/Mumbai Yes, good afternoon.
Thanks for taking my question.
I got few of them.
First on the rental per month that has declined sequentially while we are adding a lot more single tenancy which has a much higher rental than the base one as well as we are adding a lot more 5G loading particularly for the Airtel, the combined effect should have been a steady increase in the rental, can you help us understand why has it dropped sequentially this time around?
Mr. Vikas Poddar – CFO - Indus Towers Limited So, thanks for the question Sanjesh.
So first of all, I think your observation is right, we have basically seen a slight drop in our average revenue per tenancy or the ARPT, so while the underlying business growth continues as a result of the extra loading and tower rollouts and so on, we have had some transactions related to customers where we deferred the recognition of revenue in this quarter.
There is no cash flow impact of the same and as a result we have seen some decline in this quarter but on an underlying basis the quarter-on-quarter sequential growth pretty much continues to be the same in line with what we have seen in the previous quarter.
Mr. Sanjesh Jain - ICICI Securities/Mumbai Is it fair to assume that revenue will get recognized next quarter and we will have some one-off kind of a gain which will offset decline in this quarter?
Mr. Vikas Poddar - CFO- Indus Towers Limited So, this is basically a matter under discussion, we are still evaluating our position and hopefully we will be able to close and conclude this in the current quarter, but at this point in time till we have concluded it is very difficult to comment.
Mr. Sanjesh Jain - ICICI Securities/Mumbai Fair enough, but generally revenue recognition we have very stable MSA, now why has this situation arisen?
Thank you, Mr. Jain.
The next question comes from Mr. Arun Prasath from Avendus Spark Chennai.
Mr. Prasad, you may ask your question now.
Mr. Arun Prasath – Avendus Spark/Chennai Thanks, my questions are answered.
Thank you very much.
The next question comes from Mr. Sanket Baheti from GeeCee Holdings, Mumbai.
Mr. Baheti, you may ask a question now.
Mr. Sanket Baheti - GeeCee Holdings/Mumbai Thank you for the opportunity, Sir.
I have couple of questions.
Sir, what is the capex that we are building in for the full year and what is the capex requirement for lean tower versus a macro tower and what are the return ratios we are targeting for a macro tower versus a lean tower?
Mr. Vikas Poddar – CFO - Indus Towers Limited Thank you for the question Sanket.
As far as the capex for the full year is concerned, I think Prachur did mention that the order book is quite healthy, and we do expect the rollout momentum to continue.
So, I think from that perspective the capex will remain elevated for some time.
As far as the capex requirement for a lean and a macro tower is concerned, I think first of all I just want to sort of make you aware that the towers are not really homogeneous there are different varieties of towers and depending on the type of macro tower or the type of lean tower that we are building the capex profile and the return profile could be very different, but I will try to give a very generic answer, so a lean tower could be anywhere between let us say Rs.3.5 to 5 lakh and a macro tower could be anywhere between Rs.15 to 25 lakh sort of, so it is a very wide range because depending on the type of towers that we are building and typically in terms of return with lean towers our return profile is slightly better I would say probably somewhere around mid
Thank you, Mr. Baheti.
At this moment, I would like to hand over the call proceedings to Mr. Prachur Sah for the final remarks.
Mr. Prachur Sah - MD & CEO- Indus Towers Limited Thank you.
To sum up, we are pleased to have maintained the strong tower addition momentum in Q2 as well.
We expect the accelerated rural expansion of one of our major customers to continue in the near term, which coupled with the 5G rollouts augur well for us given our leadership position in the passive infrastructure space.
We endeavor to ride this growth journey in a sustainable way and create value for all our stakeholders including shareholders, customers and partners.
I wish to thank you all for joining this call.
Have a good day.
Ladies and gentlemen, this concludes the conference call.
You may now disconnect your lines.
Thank you for connecting to audio conference service from Airtel and have a pleasant evening.
Questions and answers
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Transcript of Indus Towers Limited Second Quarter ended September 30, 2023 Earnings Conference Call Republished with permission.
No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Indus Towers Limited. - 5 - performance while the accelerated 5G rollouts and rural expansion by one of our major customers would serve as significant levers of our growth.
I would now request the moderator open the floor for questions and answers.
Sunita - Moderator · Good afternoon ladies and gentlemen, I am Sunita, the moderator for this conference. Welcome to the Indus Tower Limited Second
Thank you very much Sir.
We will now begin the Question & 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, the 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.
First question comes from Mr. Vivekanand Subbaraman from Mumbai.
Mr. Subbaraman, you may ask a question now.
Mr. Vivekanand Subbaraman - Ambit Pvt Ltd/Mumbai Hi, thank you for the opportunity.
Just two questions.
So as far as the customer from whom the receivables increased during the current quarter, Vikas I noted that you mentioned that this receivable has been cleared.
What about the past dues, some of which have been written off, where are your discussions going on in that regard and secondly related to this same customer, how do you see the ability of this customer to sustain payments for the remainder of fiscal 2024 and hence your ability to pay dividends for fiscal 2024?
Thank you.
Mr. Prachur Sah - MD & CEO- Indus Towers Limited So maybe Vikas you can add, I will just summarize this payment situation so while the customer had some challenges during the quarter, but we have received the monthly payments till October from them.
Our expectation is that the monthly payment would continue and we will continue to charge as per the MSA to the same customer and we are currently working with them on creating a robust time bound plan to unwind the past dues but just want to correct that there is nothing being written off.
Mr. Vikas Poddar - CFO- Indus Towers Limited So just to elaborate, I think first of all Vivekanand we have provided as we had explained in the previous quarters as well to derisk our balance sheet, we have not written off any receivable, we are in a very active engagement, so as Prachur was saying we have received the payment subsequently, and those delays have been cleared now and we do expect the 100% or the near 100% payment to continue going forward.
There are basically some positive developments as we all know there was a hump of some financial commitments that they had in the previous quarter, but that hump is pretty much over so we do expect the near 100% payment to sort of continue and as far as the past dues are concerned once again while we all know that there is a bit of dependency on the fundraising plan, etc., but we are again monitoring that very closely.
We are in touch with the customers and trying to work on that settlement as well and when we have more clarity we will certainly keep updating you.
Mr. Vivekanand Subbaraman - Ambit Pvt Ltd/Mumbai Thank you.
This is helpful.
Just one followup, so the receivables, Rs.13 billion that increased in 1H are you confirming that in October this amount also has been cleared by the customer and related point is the provision or the receivables provision that was made, provision for doubtful debtors in first half, Rs.2.2 billion what was this regarding?
Mr. Vikas Poddar - CFO- Indus Towers Limited So first of all, let me clarify the Rs.13 billion it is a mixed bag there are various things, but the amount pertaining to this particular customer has been cleared subsequently.
The provision basically relates to the fact that there are always some timing issues, some ongoing reconciliation issues and also the fact that we are collecting some interest, etc., so in terms of the accounting we follow a very stringent ECL sort of computation and as a result we have provided for doubtful debts in this quarter to the extent of about Rs.1.3 billion, but that is as per our current accounting treatment, but I can confirm that we have subsequently received the amount that was delayed.