Indus Towers to review dividend in Q4 amid improved AGR visibility

telecom

• Indus Towers to review shareholder payouts in Q4, considering Vodafone Idea's status.
• Vodafone Idea's AGR relief boosts Indus Towers' customer stability.
• Indus Towers plans organic expansion in Africa, evaluating three countries.

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Indus Towers will review shareholder payouts at the time of its Q4 results, with management indicating that improved clarity around Vodafone Idea’s AGR-related position and financial stability will factor into the board’s decision.

Analysts had earlier said that relief on adjusted gross revenue (AGR) dues for Vodafone Idea would significantly benefit Indus Towers by improving visibility on the telecom operator’s ability to make timely vendor payments and resume network capex.

“At the time of annual results at the end of Q4, the Board should look at performance and make a decision, and the Board is committed to distribution to the shareholders,” Managing Director and CEO Prachur Sah said during the Q3 earnings call.

Responding to questions on whether anything is holding back the resumption of payouts, Sah said the earlier framework remains unchanged.

“Everything will be considered. I don’t want to preempt the Board discussion right now, but everything would be considered, and the Board is committed to distribution to shareholders.”

Indus Towers last declared a dividend in May 2022 — an interim payout of Rs 11 per share — and has not announced any distribution since. The company has deferred payouts for 12 straight quarters across FY23, FY24, FY25 and the ongoing FY26, largely due to prolonged uncertainty over Vodafone Idea’s outstanding dues and payment visibility.

He added that recent changes in buyback taxation would also be evaluated when the board meets in Q4. “When the Board considers the options of distribution in Q4, all the options will be put on the table and a call will be made.”

AGR Relief Seen Supporting Customer Stability

Indus management suggested that recent government actions related to adjusted gross revenue (AGR) dues for Vodafone Idea have improved visibility around a key customer’s financial health.

“Recent actions taken by the government on AGR dues for Vodafone Idea are expected to bring financial stability, aid its financial health, and enable sustained investments in network expansion and capacity augmentation,” Sah said.

The company also confirmed that receivables from Vodafone Idea are not a concern.

“I think we don't have any outstanding due from them, especially the overdue part. It’s business as usual based on the credit period as per the agreements,” Sah said.

Addressing earlier caution around payouts, Sah explained that past board considerations were linked to uncertainty around a major customer’s financial stability.

“The two main considerations were the conditions of a major customer. At the time, there was less clarity in terms of what the plan was for that particular customer and their financial stability.”

With visibility improving and tenancy additions picking up, management signalled a more constructive backdrop.

“Building on the momentum we saw in the previous quarter, Q3 witnessed a healthy pickup in tenancy additions, particularly from one of our large customers. This reflects a gradual improvement in network investment activity as the operating environment for the customer continues to improve,” Sah said.

On international growth, Indus Towers reiterated that its Africa foray will be largely organic, focused on greenfield tower deployment rather than acquisitions. “Africa is not a short-term strategy, it’s a long-term strategy. It’s organic growth driven,” Sah said.

The company is currently assessing three countries and laying operational groundwork before commencing deployments. “We are in the initial stages of assessing the three countries in terms of operations — how the sites are built, what kind of supplier ecosystem exists, and how we can add value by reducing costs and creating differentiation for customers.”

Initial capital expenditure for Africa is expected to be debt-funded, though the structure is still under evaluation.“Whatever initial CAPEX would be required, although nothing major, would be debt-funded,” Sah said.

The level at which the debt would be raised remains undecided. “It could be at the UAE level, it could also be at the GIFT City level. We are yet to work on those details.”

While prioritising organic growth, the company remains selectively open to acquisitions. “If any inorganic opportunity is considered, it will be at a valuation that we can agree upon or that will make sense to us,” Sah said.