CIEL HR Services Receives Final Observations from SEBI
CLSA Adds Indus Towers to 'High Conviction' List, Eyes 62% Upside


Last Updated: 17th January 2025 - 02:33 pm
Hong Kong-based brokerage firm CLSA has included Indus Towers Ltd., a telecom infrastructure provider, in its 'high conviction' list, signaling heightened optimism toward the stock. The firm has upgraded Indus Towers to a 'high conviction' outperform rating, setting a target price of ₹575 per share—implying a significant 62% potential upside from the previous session’s closing price.
As of 9:35 AM, Indus Towers' share price was trading at ₹358.6 on the NSE, reflecting a 1.2% increase.
Strong Financial Backing and Reduced Overdues
Indus Towers recently received ₹1,900 crore from Vodafone Idea, which utilized funds from a preferential equity issuance to its UK-based co-promoter, Vodafone Group Plc, to clear outstanding dues.
CLSA highlighted that Indus Towers' overdue payments from Vodafone Idea have dropped by over 70% from their peak levels. The reduction in outstanding dues is boosting confidence in the company’s planned investments in 4G and 5G networks.
Currently, Indus Towers offers a 10% EBITDA CAGR, robust cash flows, a free cash flow (FCF) yield of 7%, and an expected return on capital employed (RoCE) of 23% by FY27.
Citi Research and Government Policy Impact
Earlier this month, Citi Research reiterated its positive stance on Indus Towers, citing the government's waiver of bank guarantees as a 'major relief' for Vodafone Idea. The waiver also benefits Indus Towers, and any progress on Vodafone Idea’s debt funding remains a key factor to watch.
Following the recent developments, CLSA anticipates greater clarity on Indus Towers resuming dividend payouts in Q3 or Q4 of FY25. Additionally, the company’s declining capital expenditure is supporting free cash flow generation. A rise in tenancies from Vodafone Idea is expected from Q3, with a potential turning point in the tenancy ratio from Q4.
Market Performance and Growth Outlook
Over the past year, Indus Towers’ stock has surged 70%, significantly outperforming the benchmark Nifty 50, which gained 7.5% in the same period.
The company’s strong financial position, coupled with its strategic investments in next-generation networks, makes it an attractive bet for investors. The telecom infrastructure sector in India is poised for substantial growth, driven by increasing data consumption, expanding 5G coverage, and government initiatives to enhance digital connectivity.
Additionally, the improving financial health of Vodafone Idea, a key customer of Indus Towers, is a crucial factor in sustaining long-term revenue growth. As Vodafone Idea stabilizes its operations and expands its network, Indus Towers is likely to witness increased demand for its tower infrastructure.
The brokerage’s optimism also stems from the broader industry trend of telecom companies focusing on network expansion and technology upgrades. With 5G rollouts gaining momentum, telecom infrastructure providers like Indus Towers stand to benefit from increased capital expenditure by telecom operators.
Furthermore, as telecom operators continue to shift toward asset-light models, leasing infrastructure from established players such as Indus Towers becomes a cost-effective solution. This structural shift within the industry positions Indus Towers favorably for sustained revenue growth and improved profitability.
Given these factors, analysts believe Indus Towers remains well-positioned to capitalize on the evolving telecom landscape, offering significant upside potential for investors.
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