Company Update : Indus Towers by Motilal Oswal Financial Services Ltd
Broadly in line; elevated capex and higher receivables led to sharp moderation in FCF generation
* Indus’ 2QFY26 results were broadly in line with our estimates with recurring EBITDA (excl. provision reversals) rising 3% QoQ to INR43.8b.
* Reported EBITDA was boosted by ~INR1.95b in prior period provision reversals (entire past dues now recovered).
* Operationally, tower additions picked up QoQ after a subdued 1Q, while tenancy additions moderated likely due to tapering off of Vi’s rollouts during 2Q.
* Indus’ capex jumped ~31% QoQ, which led to moderation in FCF generation to modest ~INR3b in 2Q (vs. INR15.7b in 1Q).
Adjusted for one-offs, recurring EBITDA slightly higher due to lower employee expenses
* Consolidated reported revenue was up ~2% QoQ to INR81.9b (+10% YoY) and was in line with our estimates.
* Service revenue at INR52.5b (+3% QoQ, +11% YoY) was also in line with our estimate as slightly higher ARPT was largely offset by lower tenancy additions.
* Energy reimbursements at INR29.5b (flat QoQ, +7% YoY) was also in line with our estimates.
* Consolidated reported EBITDA was up 5% QoQ to INR45.7b (-6% YoY, 6% ahead) mainly due to prior-period provision reversals.
* Adjusted service EBITDA at INR45.2b (+3% QoQ, +15% YoY) was ~2% above our estimate.
* However, energy under-recovery widened to INR1.4b (vs. our estimate and 1Q under-recovery of INR1.25b).
* Indus reversed bad debt provision of INR1.95b in 2QFY26 (vs. bad debt provision reversals of INR0.9b QoQ and INR10.8b YoY). We didn’t build in any bad debt provision reversal for 2QFY26.
* Adjusted for bad-debt provision reversals, recurring EBITDA at INR43.8b (+3% QoQ, +16% YoY) was ~1.5% ahead of our estimate, due to lower employee expenses (-4% YoY, 8% below).
* Reported PAT at INR18.4b (+6% QoQ, -17% YoY) was ~9% ahead of our estimates, primarily due to prior period provision reversals.
* Adjusted PAT at INR16.9b (+1% QoQ, +19% YoY )was broadly in line with our estimates.
Tower additions pick-up QoQ, but tenancy additions dip; ARPT up 1% QoQ
* Net macro tower adds improved to 4,301 QoQ (higher vs. our estimate of 3,500 and 2,755 net adds in 1Q); EoP macro tower count stood at ~256.1k.
* Indus added modest 28 net leaner towers QoQ (vs. 57 QoQ in 1Q), to take overall leaner tower count to ~13.96k.
* For sixth successive quarter, net macro tenancy additions were higher than tower adds, at 4,505 (though lower vs. our estimate of 7,000; and further moderation from 6,064 QoQ in 1Q), taking total tenants to ~415.7k. The moderation was likely on account of tapering off of Vi’s rollouts.
* End-period tenancy ratio moderated QoQ to 1.62X (vs. 1.63X QoQ), as incremental tenancy ratio was subdued at 1.05X.
* Reported sharing revenue per macro tenant (ARPT) inched up ~1% QoQ to INR41.7k (+1 YoY) and was 1% above our estimate (INR41.4k).
Other highlights: Elevated capex and higher receivables led to moderation in FCF generation; Receivables increase QoQ
* Indus’ receivables increased by ~INR5b QoQ to INR48.5b. Indus also reversed ~INR1.95 bad debt provisions, implying a net shortfall of ~INR3b during 2QFY26.
* Over the past few quarter, Indus has recovered entire ~INR57.7b towards past dues from Vi, (vs. outstanding of INR3b/INR53.9b at Jun’25/Mar’25/Mar’24).
* Capex jumped ~31% QoQ to INR25.6b, with pick-up in tower additions, elevated capex both for new tower additions, battery replacement and also high maintenance capex.
* Reported adjusted fund from operations (EBITDA net of lease payment and maintenance capex) at INR30.4b improved 7% QoQ, though lower YoY primarily due to lower prior period provision reversals.
* Net debt including lease liabilities declined ~1.5% QoQ to INR165b (vs. ~INR167b QoQ); while excluding lease liabilities, the company’s net cash increased to ~INR29.6b net cash (vs. ~INR24.6b net cash QoQ).
* Indus’ reported 2Q FCF moderated sharply to ~INR3b (vs. INR15.7b in 1Q), primarily due to higher capex and increase in receivables. For 1HFY26, Indus’ FCF stood at INR18.6b (vs. INR98.5b in FY25, due to collection of Vi’s past dues).
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