Whalesbook
Rating Downgrade and Target Cut
ICICI Securities initiated coverage on Indus Towers with a 'Reduce' rating. The brokerage revised its target price to ₹350 per share, down from the previous ₹390 target. This adjustment reflects concerns over the company's recent financial performance and future capital allocation.
EBITDA and Operational Performance
Indus Towers' reported EBITDA for the fourth quarter of FY26 was weak, primarily due to several one-time charges and higher seasonal maintenance expenses. Tower and tenancy additions remain strong, and the company has secured a significant order book for FY27. However, the immediate earnings report showed pressure. The company noted minimal customer churn to date, with no large pending renewals anticipated for RJIL (Reliance Jio Infocomm Limited).
Capital Expenditure and Dividend Concerns
Indus Towers spent a substantial INR 88 billion on capital expenditures in FY26, representing 27% of the company's revenue. This spending supported growth initiatives, green energy solutions, and essential maintenance. Indus Towers announced a dividend of ₹14 per share, equivalent to 100% of its FY26 free cash flow. However, the report noted the company has not planned any dividend payout for the two years it previously skipped them. This dividend policy falls short of market expectations, contributing to the negative outlook.
Outlook and Estimates
ICICI Securities has raised its Earnings Per Share (EPS) estimates slightly. However, it has concurrently raised its projection for capex intensity for both FY27 and FY28. This combination of increased future spending and softer near-term earnings led to the revised valuation and rating. The brokerage maintains its 'Reduce' stance, suggesting current market valuations do not fully account for anticipated headwinds.