Indus Towers reports Rs 708 crore net loss, raises concerns over Vodafone Idea's dues

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Indus Towers Ltd., formerly known as Bharti Infratel reported a net loss of Rs 708 crore during the December quarter, citing a persistent shortfall in collections from a "major customer," which is Vodafone Idea.

As a result, the company, during the quarter has made a doubtful debt provision worth Rs 2,298.1 crore against receivables from the telecom operator.

This takes the total provision made by the company against Vodafone Idea in excess of Rs 5,000 crore. It had earlier made a provision of Rs 1,770 crore in the September quarter, adding to the Rs 1,232 crore it had already provided in the June quarter.

In its post earnings statement, Indus Towers mentioned that the "large customer" accounts for a substantial part of the company's sales and a significant part of the outstanding trade receivables as well.

"The said customer in September results had indicated its ability to continue as going concern was dependent on ability to raise additional funds, successful negotiations with lenders and vendors," the company said.

Indus Towers' board had warned Vodafone Idea in September of discontinuation of services over pending dues that amounted to nearly Rs 7,000 crore. Following this, Vodafone Idea sought softer repayment terms, which led to Indus Towers allowing the company to make staggered payments until July 2023 to pay up the pending dues.

However, the company said that Vodafone Idea's promise of making full payments from January 2023 has not materialised.

The company further said that the funding plan of the said customer has not materialised during the quarter and that the customer has indicated challenges in complying with the higher payment plan in the future.

Indus Towers has a secondary pledge over the remaining shares of Vodafone Idea's promoters in the company and another corporate guarantee extended by the promoters, which may get triggered. However, both the secondary pledge and the corporate guarantee are not enough to cover the outstanding dues, according to Indus Towers.

The tower operator has warned that the potential loss of a "significant customer" due to its ability to continue as a going concern could have an adverse effect on the business.

On the earnings front, Indus Towers' consolidated revenue declined 2 percent from last year to Rs 6,765 crore. Operating profit or EBITDA declined 68 percent from last year to Rs 1,186 crore. Free cash flow for the quarter was a negative Rs 621 crore.