INDUS TOWERS

‘Towering’ enabler of telecom

Gurugram (Haryana)-headquartered Indus Towers is one of the largest telecom tower companies in the world. A provider of telecom infrastructure, the company deploys, owns and manages telecom towers and communication structures for various mobile operations. Formed by the merger of Bharti Infratel Ltd and Indus Towers, the company enables communication for millions of people daily and provides affordable, high-quality and reliable services for the growing network connectivity needs of India.

Today, it has 211,775 towers and 360,679 locations (as on December 31, 2023), and a nationwide presence covering all 22 telecom circles. The company’s leading customers include Bharti Airtel, Vodafone Idea Ltd and Reliance Jio Infocomm, which are the leading wireless communications service providers in India. The company deploys the passive physical infrastructure necessary to house the active equipment — the base transceiver station, transmission link and microwave antenna — of its customers.

Indus Towers has made rapid strides in its financial performance. During the last 12 years, its sales turnover has more than trebled from Rs 9,452 crore in fiscal 2012 to Rs 28,382 crore in fiscal 2023, with operating profit almost trebling from Rs 3,540 crore to Rs 9,669 crore and the profit at net level trebling from Rs 749 crore to Rs 2,236 crore. What is more, prospects for the company going ahead are all the more promising. Consider:

• Indus Towers is a big beneficiary of the government’s commitment to facilitating the swift rollout of telecom infrastructure across the nation.

GREEN POLICY

• New Delhi has remained steadfast in its commitment to facilitate the swift rollout of telecom infrastructure across the nation, while keeping sustainability in view. To this end, the Ministry of Power has notified the Green Open Access policy and a few states have already adopted it with minor amendments. The government is also engaged in discussions with multiple stakeholders for faster implementation of Green Open Access at the ground level. These steps, aimed at incentivizing the use of cleaner sources of energy, reiterate the government’s focus on infrastructure expansion in a sustainable way. This will benefit Indus a lot.

• The arrival of 5G in India will prove a boon to Indus. With regards to 5G, rollouts by the top two operators continue to progress at a swift pace with these operators now catering to over 50 million 5G customers each. The total number of 5G base transceiver stations, or BTS, deployed stands at almost 340,000, with more than 7,000 BTS being deployed per week in August. The company’s loading revenues have continued to increase in lieu of this accelerated deployment of 5G on its sites. As the network matures, the management expects the demand for new sites to increase in order to aid network decongestion. This bodes well for the company, given its leadership position in the passive infrastructure space. Statistics mentioned in the Ericsson Mobility Report reaffirm the growth potential of 5G. As per the report, global 5G subscription grew by 175 million in the June quarter, compared to 125 million additions in the March quarter, and have reached almost 1.3 billion. The 5 billion mark is expected to be reached by the end of 2028, with 5G subscriptions in India also expected to reach 700 million by the same time. Also, the emergence of use cases of 5G, such as the launch of fixed wireless access, or FWA, by major operators will also drive data consumption, which will need infrastructure.

ADDING TOWERS

• The record addition of towers during the first two quarters of FY2024 will give a big boost to the company’s performance. In Q2, the company surpassed its tower addition reported in Q1. It managed to achieve this despite the harsh weather conditions usually witnessed during this time of the year. Driven by continued strong demand from one of its customers, it added 5,928 macro towers and 5,583 cor responding co-locations. The total macro towers and colocations at the end of Q2 stood at 204,212 and 353,462 respectively, which represented a significant milestone for Indus Tower when it crossed 200,000 macro towers, with each growing by 8.7% and 4.5% on a year-on-year basis. Its industry-leading tenancy ratio stands at 1.73. The addition of co-locations on leaner towers remained healthy at 789 in Q2, and the overall base increased to 8,643 co-locations. Including leaner towers, its net co-location additions were at 6,372 in Q2 as against 5,984 in Q1.

COST CUTTING

• The company has resorted to a strategy of cost reduction, which will push up the bottomline. On cost efficiency, it continues to take steps towards optimizing both operating and capital expenses. It has been consistently reducing diesel consumption and recorded an 8% year-on-year reduction in Q2. Such a significant reduction was achieved despite an increase in overall energy load from the addition of new sites and 5G equipment. In Q2, the company signed an agreement with IOC Phinergy to deploy clean energy systems. It has agreed to deploy 300 zero emission energy systems based on aluminum-air technology to optimize diesel consumption at its telecom tower sites. It has also added more than 2,200 solar sites during the quarter and continued to convert tower sites from indoor to outdoor, which aided the overall energy cost optimization. A sharp focus on reducing the rental cost per tower through negotiations, site selection and product selection to minimize its footprint has also yielded positive results. On capex, its initiatives are directed towards driving cost efficiencies across processes, including designing, procurement, and erection through use of automation and digital interventions. This has helped it build towers that are cost- competitive. In FY 2025, the company is expected to report EPS of Rs 20.7 The scrip trades at Rs 218. P/E on the FY 2025 projected EPS works out to just 10.5. Added to this, the company is expected to provide a hefty dividend of Rs 20 per share to its shareholders in FY 2024, which gives a dividend yield of 9.2%. 

PERFORMANCE INDICATORS (Rs. in crore)

PIRAMAL PHARMA

Turning the corner in H1FY2024

Piramal Pharma (PPL), belonging to the Ajay Piramal group, is a unique pharmaceutical company offering a portfolio of differentiated products and services through end-to-end manufacturing capabilities across 15 global facilities and a global distribution network in ovThe company includes: (a) Piramal Pharma Solutions (PPS). An integrated contract development and manufacturing organization (CDMO), PPL offers contract manufacturing for API, APAPI, and a wide variety of dosaged forms; (b) Piramal Critical Care (PCC), a complex hospital Generics Business, and (c) the India Consumer Healthcare Business (ICHB) selling over-the-counter products.

PPS offers end-to-end development and manufacturing solutions through a globally integrated network of facilities across the drug life cycle to innovators and generic companies. PCC’s complex hospital product portfolio includes inhalation anaesthetics, intrathecal therapies for spasticity and pain management, injectable anaesthetics, injectable anti-infectives, and other therapies. The India Consumer Healthcare Business is among the leading players in India in the self-care space, with established brands in the Indian consumer healthcare market. In addition, PPL has a joint venture with Allergan, a leader in ophthalmology in the Indian formulations market. In October 2020, the company received a growth equity investment from the Carlyle group.

The company, which came into existence three years ago, has started steadily expanding its business. During the last 3 years, its sales turnover has moved up from Rs 6,315 crore in fiscal 2021 to Rs 7,082 crore in fiscal 2023. However, fiscal 2023 was a challenging year marked by rising interest rates, geopolitical uncertainties, post-pandemic demand, supply volatility and a significant rise in energy prices. External factors significantly influenced PPL’s financial performance, adversely affecting profitability. The company’s operating profit declined from Rs 1,428 crore in fiscal 2021 to Rs 950 crore in fiscal 2022 and further to Rs 629 crore in fiscal 2023.

However, the worst is over. After the challenging fiscals 2022 and 2023, fiscal 2024 has been ushered in on a promising note. Signalling recovery and a turnaround for the business, sales during the first half (April to September 2023) grew 14 per cent yoy, driven by broad- based performances across all the three businesses, and the EBITDA margin shot up 58 per cent, driven by healthy revenue growth and cost optimization measures. In the meanwhile, the company successfully completed its Rs 1,050-crore rights issue, which was subscribed 128 per cent. The proceeds of the issue enabled the company to reduce its net debt by Rs 958 crore since March 31, 2023 to Rs 3,823 crore by September 2023. Prospects for the company going ahead are all the more promising. Consider:

• During the first half of the current fiscal, the company saw a steady momentum for the overall business. During Q2 FY2024, it has won new orders amounting to Rs 1084 crore. This will push up the pace of business in the second half of the current fiscal.

• Maintaining that with the H1FY2024 performance the company has turned the corner, Ms Nandini Piramal, chairperson of PPL, adds, “Our CDMO business returned to mid-term growth with continued order inflows, especially for differentiated offerings and innovation-related work. Our capacity expansion for inhalation anesthesia products is progressing well as we look to capitalize on the healthy demand in the global market. Our India consumer healthcare business is delivering steady growth via our power brands. Historically, our H2 has been better both in terms of revenue and profitability. We hope to continue our momentum in H2FY2024 and fiscal year 2024 with a robust performance.”
• Remarkable order inflows continued in CDMO during Q2FY2024 with over 40 per cent higher orders in H1FY2024 as compared to the same period a year ago.
• The company is consolidating CDMO partners through acquisition of Hemmo Pharmaceuticals (Rs 775 crore), a 27.78% stake in Yapan Bio (Rs 101.7 crore) and a JV with Allergan.
• The company’s focus on power brands and the e-commerce route for marketing is expected to fuel growth in the ICH segment.

PERFORMANCE INDICATORS (Rs. in crore)