Indus Towers Q1 FY27 earnings call

Indus Towers reported a healthy Q1 FY27, with gross revenues growing 4.6% year-on-year to INR 8,430 crores. Core revenues from rental services increased 5.2% year-on-year to INR 5,370 crores, driven by customer network expansion. Reported EBITDA stood at INR 4,520 crores, up 3.0% year-on-year, while profit after tax saw a modest 0.5% year-on-year increase to INR 1,750 crores. The company generated robust free cash flow of INR 1,440 crores during the quarter.

The company demonstrated strong rollout momentum, adding approximately 3,100 macro towers and 4,200 colocations in Q1 FY27, contributing to a 6.3% year-on-year growth in its tower base and 5.1% in colocation base. The installed base of 5G BTSs reached 563,000, with 32,000 new 5G BTSs deployed during the quarter. This expansion is supported by continued network build-out by major customers and the migration of expired tenancy portfolios to Indus.

Indus Towers continues its focus on green energy initiatives, adding solar access to about 3,700 sites, bringing the total to 46,000 sites with solar access. This contributed to a 13% year-on-year reduction in diesel consumption in Q1 FY27, despite increased co-locations and network loading. The company is actively pursuing a long-term strategy to replace diesel-based operations with lithium-ion battery banks, aiming to convert operating expenses into capital expenditure for improved efficiency and sustainability.

The company's strategic foray into Africa is progressing as planned, having secured all necessary regulatory approvals and operating licenses in Nigeria, Uganda, and Zambia. Orders have been obtained from an anchor customer, key supply orders placed, and partner onboarding initiated for network operations. Rollouts are anticipated to commence in the next quarter and scale progressively across these markets, with initial years expected to involve moderate, largely debt-funded capex.

The EBITDA margin for Q1 FY27 was 53.6%, a decrease of 1.5 percentage points year-on-year and 0.9 percentage points quarter-on-quarter. This compression was partly attributed to seasonal factors, particularly heavy monsoons in the first half of the fiscal year, and the impact of past period settlements. The energy margin stood at -4.6% in Q1, compared to -3.6% in Q4 and -4% in the corresponding quarter last year, with management expecting improvement as the year progresses and weather conditions normalize.

Maintenance capex for the quarter approximately doubled from INR 250 crores to INR 500 crores, primarily driven by the strategic transition from lead-acid to lithium-ion batteries. While this involves higher upfront capital expenditure, the longer life cycle of lithium-ion batteries is projected to reduce the overall Total Cost of Ownership (TCO) and future capex outflows. Battery supplies, which were impacted by geopolitical disturbances, are expected to recover from August.

Indus Towers maintains a strong order book with clear visibility for the next 3-4 quarters, supporting continued network expansion. Although Q1 rollouts were slightly impacted by initial tower manufacturing issues due to geopolitical situations and LPG shortages, these supply chain disruption^🌐s have largely been resolved for towers. The company expects deployment activity to accelerate in the coming quarters^⏳, leveraging its robust order book.