Shares of Indus Towers fell 7 percent on January 25 after the mobile tower installation company reported loss for third quarter of FY23 under doubtful debt provision against a telecom operator.
Although the company avoided to name the telecom operator that can be blamed for delay in payment of receivables, experts believe it is Vodafone Idea that is grappling with funds crunch.
Indus Towers posted a consolidated loss of Rs 708.2 crore for the quarter ended December FY23 as against a profit of Rs 1,570.8 crore a year back.
"A large customer of the group accounts for substantial part of net sales for the period ended December 31, 2022 and constitutes a significant part of trade receivables and unbilled revenue as of December 2022," Indus Towers said its filing to exchanges.
"During Q3FY23, the funding plan of the said customer has not materialised and although the committed part payment till December has been received, the customer has indicated challenges in complying with the higher payment plan in future."
Accordingly, the Indus Group followed a stringent policy for making doubtful debt allowance in respect of overdue recoverable, which has resulted in additional allowance for a doubtful debt of Rs 2,298.1 crore during the December FY23 quarter, it added.
Vodafone Idea is yet to announce its quarterly earnings. In September FY23 quarter, it had posted a loss of Rs 7,595.5 crore, widening from Rs 7,144.6 crore in the same period last fiscal.
Indus Towers has reported a revenue of Rs 6,765 crore for the December FY23 quarter, down 2.3 percent over the last year, and its EBITDA (earnings before interest, tax, depreciation and amortisation) plunged 68 percent to Rs 1,185.8 crore from the year-ago period.
EBITDA margin for the quarter at 17.5 percent dropped from 53.47 percent in the corresponding period last financial year, hit by other expenses that jumped nearly 20-fold to Rs 2,418 crore in Q3FY23.
"Both adjusted revenue and EBITDA margin below estimates. Delay in collection of receivables from VIL impacting financial performance," Yes Securities said.
The brokerage said adjusted revenue (excluding deferred revenue of Q2FY23) declined by 1.5 percent on-quarter to Rs 6,765 crore and continued to face delay in collection of receivables from VIL.
On the sequential basis, EBITDA margin decreased by 1,777 bps to 17.5 percent, led by higher other expenses of Rs 2,417.8 crore (which included provision for doubtful debts of Rs 2,270.1 crore), said Yes Securities which currently has an 'add' rating on the stock.
Total number of towers grew 0.8 percent sequentially and 2.5 percent annually to 1,89,392 as of December FY23, while total number of co-locations rose by 0.4 percent sequentially (1.3 percent on year) to 3,39,435.
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