| Tower Vision India Private Limited | ||||
| Rating placed on 'Watch Developing' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has placed its rating on the bank facilities of Tower Vision India Pvt Ltd (TVIPL) on ‘Rating Watch with Developing Implications’.
The rating action follows the company’s plan to merge with the parent entity, Ascend Telecom Infrastructure Pvt Ltd (ATIPL). On June 14, 2023, TVIPL was acquired by ATIPL and GIP EM Ascend 2 Pte Ltd (GIP). ATIPL acquired a stake of 92.7% in the company, while the balance is held by GIP. Post the acquisition, CEO of ATIPL has been designated as group CEO and looking after combined operations. CRISIL Ratings understands that TVIPL and ATIPL are expected to merge their operations in the near term, subject to requisite regulatory approvals. Both the companies have approved the scheme of amalgamation.
CRISIL Ratings believes the merger will aid the business risk profile of the combined entity with better market share, which may translate into higher bargaining power along with likely improvement in operating efficiency through synergies due to same business. However, debt protection metrics may get impacted by the higher leverage of ATIPL.
CRISIL Ratings will analyse the combined risk profile once the business and financial details of ATIPL are available. CRISIL Ratings will continue to monitor the developments in this regard and will resolve the watch once there is more clarity on the combined risk profile or when the transaction is concluded. That said, TVIPL will continue to meet debt obligation on all the rated instruments.
The rating continues to factor in the established market position of TVIPL, and its healthy business and financial risk profiles. The company has stable cash accrual, supported by its long-term master service agreements (MSAs) with major telecom operators. Moreover, given the criticality of tower infrastructure for telecom operators, a high stickiness of tenancies has been observed, except for the consolidation of telecom operators in the industry.
Financial risk profile remained healthy with strong debt protection metrics, as reflected in the net debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio of less than 1 time as on March 31, 2023, driven by steady operating performance and gradual reduction of term debt on books over the past few fiscals. TVIPL’s has also refinanced its existing debt recently at a lower interest rate resulting in improved profitability.
The company’s operations are exposed to counterparty exits given the competitive nature of the telecom services industry, and the weak financial health of some of the operators. However, in line with the MSA terms, with exit in tenancies the revenue per tenant needs to be adjusted upwards, thereby partially mitigating the revenue loss from loss of a tenant. The company’s ability to take such hikes, if needed, will be monitorable.
These strengths are partially offset by moderately large working capital requirement because of stretched receivables as two of the operators have modest credit risk profiles. |
Analytical Approach CRISIL Ratings continues to have a standalone approach for assessing the credit risk profile of TVIPL, till its proposed merger with ATIPL gets concluded. |
Key Rating Drivers & Detailed Description Strengths:
As major telecom operators look to expand their network to provide 4G/5G services, the demand for higher tenancies per tower is expected to remain healthy over the medium term.
Post-merger, operating efficiency is expected to improve given the synergies being realised by the two companies. Moreover, the combined entity shall have a higher bargaining power with the operators and vendors. The merged entity is likely to have a higher potential for sharing tenancies due to significant increase in the footprint.
However, the merged entity will have a larger debt as ATIPL has contracted additional debt to fund the acquisition. However, debt protection metrics should remain strong given steady cash accrual.
Weakness:
That said, TVIPL follows a prudent policy of erecting a tower only when it has an anchor tenant, and enters into a long-term contract with exit penalties during the lock-in period. Therefore, the company is expected to continue to have strong returns on investment. Moreover, healthy cash accrual and strong liquidity should be sufficient to fund any capex requirement, thereby limiting reliance on additional debt.
Receivables level was moderately high at 78 days as on March 31, 2023, because more than 40% of the tenancies are with two telecom operators with modest credit risk profiles. However, collection from these operators has improved over the past few quarters, and working capital cycle is expected to get better over the medium term with recovery of overdue receivables.
Since the merged entity is expected to focus on consolidation, new rollouts are likely to be limited over the medium term. Hence, capex requirement will remain minimal during this period. |
Liquidity: Strong Cash and equivalent stood at ~Rs 400 crore as on December 31, 2023. The company does not have any working capital facility and maintains adequate liquidity to meet operating expenses, capex and debt obligation. Steady annual net cash accrual of Rs 200-250 crore over the medium term and current liquidity on books shall be sufficient to cover scheduled debt obligation of Rs 100-110 crore in fiscal 2024 as well as capex requirement. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company TVIPL was incorporated in 2006 in New Delhi and was the first tower management company in India to operate as an independent unit. The company has received equity infusion from several private equity players over the years. On June 14, 2023, there was a change in its ownership, with ATIPL and GIP acquiring 92.7% and 7.3%, respectively. GIP owns 100% in ATIPL, and therefore, holds 100% shareholding (directly and indirectly) in TVIPL. GIP has extensive experience in managing infra assets including digital infrastructure, globally and in India.
TVIPL owns and operates wireless communication towers of all types across India. It had 9,297 towers occupied by 16,290 tenancies (spread across all telecom operators) as on September 30, 2023. |
Key Financial Indicators (CRISIL Ratings-adjusted)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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