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Indus confident of recovering dues from Vodafone Idea, expects cash flow improvement by FY25

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In Short:

Indus Towers expects cash flow to improve in FY25 as Vi clears past dues. Vi raised Rs 18,000 crore through FPO, but timing to clear dues is uncertain. Ambit Capital estimates Vi’s dues at Rs 10,000 crore. Indus recovered additional sums in March quarter. Vi plans to use FPO proceeds for 4G and 5G expansion. Indus reported 32% jump in net profit. Vi’s FPO followed by Rs 25,000-crore debt issue to strengthen competition against rivals.

Indus Towers Expecting Improved Cash Flow in FY25

Indus Towers is optimistic about a boost in cash flows for the fiscal year 2025. This optimism stems from the company’s confidence in swiftly recovering its backlog of past dues from key customer Vodafone Idea (Vi), especially after Vi’s recent successful Rs 18,000 crore follow-on public offer (FPO).

Expectations on Dividend Payouts

The leadership at Indus Towers indicated that the board would consider dividend payouts for FY25, with the timing dependent on Vi’s ability to clear its overdue payments promptly.

Managing Director Prachur Sah mentioned during the earnings call that with the recent fundraise, they anticipate the pending dues from Vi to be settled swiftly. However, no specific timeline was provided. The discussions are ongoing with Vi on the clearance of outstanding dues, but details on the funding source remain undisclosed.

Financial Updates and Future Plans

Ambit Capital approximated Vi’s overdue amount to Indus at Rs 10,000 crore. In the March quarter, Indus Towers managed to recover sums beyond the current dues collection, resulting in a reduced provision for doubtful receivables to around Rs 5,385 crore.

Vi’s Chief Executive, Akshaya Moondra, mentioned that the funds from the recent FPO would not be used to clear dues of any promoter or promoter group entity. The telco plans to settle vendor dues from operational cash flows in the future.

In the near term, Vi aims to raise Rs 25,000 crore through a debt issue following the FPO. This fundraising is part of Vi’s strategy to enhance competitiveness against rivals like Reliance Jio and Bharti Airtel.

Outlook and Market Projections

Indus Towers’ management anticipates a stronger Vi to drive additional business for the tower company in FY25, especially with Vi expanding its network infrastructure. Analysts foresee significant tenancy additions for Indus as Vi pursues network expansion in priority markets.

Vi has designated a portion of the FPO funds for 4G expansion and 5G rollouts. The company’s focus on network enhancement is expected to have a positive impact on Indus Towers in terms of increased business opportunities.

Financial Performance and Stock Market Response

Indus Towers reported a 32% year-on-year increase in net profit for the fiscal fourth quarter, reaching Rs 1,853 crore. This growth was attributed to record tower additions from Bharti Airtel’s 5G rollout and improved collections, including the recovery of past dues from Vi.

On the stock market, shares of Indus closed 0.85% higher at Rs 354.80 on the BSE following the developments.

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