Indus Towers on Wednesday said the confidence in free cashflow improvement as well as changes to the current tax regime for buyback effective October 1 are among the key reasons for the tower company to consider a Rs 2,640 crore share buyback via tender offer. The company was not able to pay dividends to the shareholders for the past two years, and sees buyback as a tax efficient way of distributing cash in the current tax regime.
“Overall objective of this buyback is to basically distribute the cash. There is more confidence in free cash flows going forward,” Vikas Poddar, chief financial officer of Indus Towers, said in the post April-June quarter earnings call. The company’s confidence on improvement in cashflows comes from the fact that its one of the largest clients Vodafone Idea has started clearing past dues besides paying monthly bills.
With regard to changes in the buyback taxation, from October 1 the entire amount received by shareholders from tendering shares in the buyback, will be taxed like dividends as per their tax slabs. Earlier, the tax burden of buybacks was on companies.
After a gap of eight years, Indus Towers on Tuesday approved to buyback up to Rs 56.7 million equity shares. The company will buyback shares at a price of Rs 465 a share, which is a premium of 4% from the stock’s closing price of Rs 447.95 on Tuesday. The record date for the share buyback has been fixed at August 9, 2024.
“From a company perspective, it (buyback) certainly improves the financial ratios for us and it also helps in preserving our distributable reserves to some extent for any future dividend,” Poddar said. With regard to past dues from Vodafone Idea, Indus Towers said it is discussing a final payment plan with the company to clear the balance. Besides, the company is also talking to the telecom operator on its network expansion plans after the recent fundraise.
During Q1, Indus Towers had a write back of Rs 760 crore in provision for doubtful receivables, aided by collections against past overdue from Vodafone Idea. The firm now carries an allowance for doubtful receivables of Rs 4,624 crore as at June 30 towards Vodafone Idea compared to Rs 5,385 crore as on March 31.
As on June 30, Indus Towers’ total trade receivables was at Rs 5,722 crore down from Rs 6,451 crore in the preceding quarter.
“We remain confident of collection of our past dues and participation in the network expansion of the said customer (Vodafone Idea),” said Prachur Sah, managing director and chief executive officer of Indus Towers.
Sah, however, did not share any timelines and details on the order book from Vodafone Idea for expanding its network with addition of towers.
Indus Towers currently constitutes 45-50% of the total towers footprint in the country. The company has a tower tenancy ratio of 1.66. Tower tenancy means the number of tenants on a tower. An increase in tenancy, leads to incremental revenue and Ebitda, which means that the key driver of revenue growth is tenancy.
In the April-June quarter, the company’s revenue from operations rose 2.6% sequentially and 4.3% YoY to Rs 7,383 crore. Net profit rose 3.9% quarter-on-quarter and 43% YoY to Rs 1,926 crore.
During the quarter, Indus Towers added 6,174 towers, taking the total macro towers to 225,910. Co-locations rose by 6,340 to 374,928. The company also added 492 leaner sites, taking total leaner sites to 11,178.
The average rent paid by a customer to Indus Towers for using towers was down 1% quarter-on-quarter to Rs 41,094 per installation per month in the quarter.
2024-08-01T03:27:38Z