Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities and bond of Indus Towers Limited (Indus) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘Crisil AA+’. Short-term rating and commercial paper has been reaffirmed at ‘Crisil A1+’. Also, ratings on Rs 750 crore bond have been withdrawn as they have been redeemed. The withdrawal is based on independent confirmation of redemption of this instrument, in line with the withdrawal policy of Crisil Ratings.

 

The revision in outlook reflects a change in analytical approach whereby parent notch-up support is applied to Indus from its parent, Bharti Airtel Limited (BAL; rated 'Crisil AA+/Positive/Crisil A1+'). Pursuant to Indus doing a buyback of 2.107% of their shares in 2024 and Vodafone shareholders divesting their entire holding in Indus in December 2024, BAL has become the sole promoter in Indus with shareholding of 50.005% as on December 31, 2024. Hence, effective November 19, 2024, BAL has begun fully consolidating Indus in its results. Consequently, the ratings for Indus now consider the benefits from strong operational, financial and managerial linkages with BAL.

 

The standalone ratings for Indus continue to reflect its strong position in the Indian telecommunication (telecom) tower market and healthy financial risk profile, supported by expectation of healthy cash accruals.

 

Operating profits improved to Rs 16,450 crore for the nine months through fiscal 2025, from Rs 10,591 crore for the corresponding period in fiscal 2024, led by reversal of allowances for doubtful receivables and advances (net) of Rs 4,854 crore. Indus has made provisions of around Rs 5,300 crore primarily in fiscal 2023 against the long due receivables from one of its largest tenants. In fiscal 2024 and ongoing fiscal 2025, company has received payments to the tune of Rs ~5,227 crores from this tenant till December 31, 2024, over and above receipt of current dues leading to reversal in provisions. Timely collection of dues from its tenants will remain monitorable for Indus.

 

As of December 31, 2024, Indus owned and operated 234,643 macro towers with 386,819 macro tenancies in 22 telecommunications circles in India. In the first nine months of fiscal 2025, Indus witnessed strong net tenancy additions, of which 23,031 were on macro towers and 806 on lean towers. Total macro towers added over this period are 18,907. While the tenancy ratio continued to decline to 1.65 times as of December 2024 (March 2024: 1.68 times, March 2023: 1.78), largely due to consolidation of telecom operators in line with the industry trend, a healthy percentage of new towers added during fiscal 2025 have multiple tenancies. Indus continues to have the highest tenancy ratio in the industry.

 

Indus is expected to incur capex of ~Rs 8,500 crore in fiscal 2025 (FY24: Rs 9,698 crore, FY23: Rs 4,121 crore) considering telcos have continued their 5G network capex along with network expansion in rural areas. Indus will also be acquiring 16,100 towers from BAL for ~Rs 3,500 crore tentatively by March 2025. However, the capex is incurred on the back of a long-term contract with atleast one anchor tenant, thus protecting the return on capital employed (RoCE) which is expected to continue at 19-20% at a steady state. The capital intensity is also likely to moderate over fiscals 2026 and 2027, as telcos shift their focus on RoCE improvement and monetization of 5G investments. Any significant, debt-funded capex will remain a key rating sensitivity factor.

 

These aforementioned strengths are partially offset by susceptibility to revenue and counterparty risks related to mobile network operators (MNOs) with weaker credit profiles.

 

The ratings for Indus factors in that the company will be able to sustain its credit risk profile even if it loses tenancies either due to further consolidation in the telecom industry or discontinuation of operations by a large customer. The potential weakening of its business risk profile could be offset by the sustenance of a strong financial risk profile, and the presence of strong parentage through BAL, who is expected to support the company in case of any exigency.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Indus Towers and its wholly owned subsidiary, Smartx Services Ltd. This is because the two companies, together referred to as Indus Towers, operate in the same business and have a common management.

 

Crisil Ratings has also applied its parent notch-up framework to factor in the strong linkages of Indus with its parent, BAL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong market position in the telecom tower business: Indus is the second largest player in terms of towers and largest player in terms of tenancies in the telecom tower market, with a portfolio of 2.35 lakh macro towers and 3.87 lakh tenancies as on December 31, 2024.
   

The business is characterized by stable revenue visibility, supported by long-term (for 8-10 years) master service agreements (MSAs). These MSAs include terms pertaining to lock-ins, exit penalties, committed rentals, annual rental escalation, steady upfront deposits and timely payments from tenants, thereby providing cushion to the revenue of entities operating in the telecom tower infrastructure. Moreover, a high stickiness of tenancies has been observed, given the criticality of tower infrastructure for telecom operators to run their network; MSAs may renew on expiry, except for the consolidation of telecom operators in the industry.

 

• Healthy financial risk profile: The financial risk profile is driven by strong cash flows, stable revenue visibility owing to long-term MSAs, and strong capital structure, leading to healthy debt protection metrics. Interest (including interest on lease liabilities) coverage ratio was 7.8 times for fiscal 2024 and is expected to be ~8.5 times for fiscal 2025. Networth (Crisil-adjusted) stood high at ~Rs 25,000 crore as on March 31, 2024, with low gearing. External debt (excluding lease liabilities) reduced to Rs 2,549 crore as of December 31, 2024, from ~Rs 4,724 crore as of December 2023 owing to strong cash flows.

 

Net debt to earnings before interest, taxes, depreciation, amortisation and restructuring or rent costs (EBITDAR) ratio is expected to be below 1.5 times over the medium term. Sizeable dividend payout or any large, debt-funded capex, which may constrain capital structure, are key rating sensitivity factors.

 

• Strong operational, financial and managerial linkages with BAL: Indus is strategically important to BAL as it provides critical infrastructure and the majority of BAL’s network is supported on Indus’s towers. While key managerial and treasury operations of Indus Towers will continue to operate independently, support and oversight from the Bharti group will be present. At present, all non-independent directors on the Board of Indus are from the Bharti Airtel group. Indus Towers is not expected to require any financial support from BAL, backed by its own strong accruals. However, BAL will support Indus in case of any exigency.

 

Weakness:

• Susceptibility to revenue and counterparty risk related to MNOs with weaker credit profiles: While Indus Towers has benefits from multiple tenancies, it also exposes the company to MNOs with weaker credit profiles, which contribute to 30-35% of revenue. The track record of receivables from these telcos has also considerably improved in the past few months. However, the ability of the MNOs to successfully manage their balance sheets and fulfill their payment obligations to the telecom tower companies, in a timely manner, will be a key monitorable.

Liquidity: Strong

Unencumbered cash and liquid investments stood at Rs 3,760 crore as on January 31, 2025. Cash accrual is expected at ~Rs 8,000 crore in fiscal 2026 against schedule repayments of Rs 487 crore. There was no working capital utilization in December 2024 and unutilized fund-based limits stood at Rs 6,350 crore as on January 31, 2025. The presence of BAL, as a parent, further supports its high financial flexibility.

Outlook: Positive

Indus Towers will continue to benefit from its strong market position over the medium term. Financial risk profile should remain supported by stable debt protection metrics and capital structure.

 

ESG profile

The environment, social, and governance (ESG) profile of the company supports its already strong credit risk profile. The telecom tower sector has a material impact on the environment owing to higher electricity requirement at network infrastructure with increasing data consumption. Waste associated with end-of-life network equipment and hardware can pollute land resources as well. Tower companies are also exposed to significant regulatory risk and operational issues if network disruptions occur. Moreover, the systemic importance of telecom services to society and the economy explains the importance of accessible telecom tower network to the widest number of users. Indus Towers has continuously focused on mitigating its environmental and social risks.

 

Key ESG highlights

• Indus has set a target to achieve net-zero greenhouse gas emissions by 2050, aligning with the Science Based Targets initiative (SBTi).
• In line with this target, it plans to increase integration of renewable energy and during fiscal 2024, it deployed 14,000+ solar sites (compared to 1,496 solar sites last fiscal). Further, it plans to increase the share of non-diesel generator sites to ~30% by fiscal 2025 by deploying energy storage solutions (storage solutions, including Li-ion and Valve-Regulated Lead-Acid batteries) and conversion of sites dependent on diesel generators to electricity (during fiscal 2024, 192 such site conversion were done)
• On the social front, diversity in its workforce increased from ~12% in fiscal 2024 from ~6% in fiscal 2023. The company has set a target to increase share of women employees to 14% by fiscal 2025
• Additionally, company has provided 100% safety training to workers to ensure workplace safety. Also, its lost time injury frequency fell to 0.76 in fiscal 2024 from 1.14 in previous fiscal. That said, it reported 2 worker fatalities during fiscal 2024 
• Indus Towers’ governance structure is characterized by ~36% of its board comprising of independent directors, ~9%-woman board directors, and extensive financial disclosures. Further, it has also formed an ESG committee of the Board to oversee and monitor ESG priorities.

 

There is growing importance of ESG among investors and lenders. Commitment of the company to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowing in its overall debt and access to both domestic and foreign capital markets.

Rating sensitivity factors

Upward factors:

• Increase in rating of Bharti Airtel Limited by one notch
• Sustained improvement in cash accruals with debt protection metrics, such that net debt (excluding lease liabilities) to EBITDAR ratio sustains below 1 time

 

Downward factors:

• Downgrade in the credit rating of BAL by one or more notch
• Significant weakening of operating performance owing to further consolidation of tenants or exit of any large tenant
• Any substantial, debt-funded capex or dividend payout constraining debt protection metrics, such that net debt (excluding lease liabilities) to EBITDAR ratio sustains above 1.5 times

About the Company

Indus Towers provides tower and related infrastructure and deploys, owns and manages telecom towers and communication structures for various mobile operators. As on December 31, 2024, BAL owned 50.005% stake in the company.

About BAL

Headquartered in India, BAL is a global communications solutions provider across 17 countries, spanning South Asia and Africa. The company ranks among the top three mobile operators globally and its networks cover over two billion people. Airtel is the largest integrated communications solutions provider in India and the second-largest mobile operator in Africa.
 

Its retail portfolio includes high speed 4G/5G mobile broadband, Airtel Xstream Fiber with convergence across linear and on-demand entertainment, streaming services spanning music and video, digital payments and financial services. For enterprise customers, Airtel offers a gamut of solutions that include secure connectivity, cloud and data centre services, cyber security, Internet of Things, Ad Tech and cloud-based communication.

As on December 31, 2024, the company had 35.7 crore mobile subscribers in India and around 16 crore subscribers in Africa. In the first nine months of fiscal 2025, BAL generated a revenue of Rs 1,33,635 crore with EBITDA of Rs 77,595 crore.

Key Financial Indicators

Particulars (for year ended Mar 31)	Unit	2024	2023
Operating revenue	Rs crore	28,601	28,382
Profit after tax (PAT)	Rs crore	6,036	2,040
PAT margin	%	21.1	7.2
Adjusted debt/adjusted networth	Times	0.76	0.91
Interest coverage*	Times	7.8	9.0

*includes interest on lease liabilities

Any other information: Not Applicable