Indus Towers is adding tenants faster than it is adding revenue

Indus Towers earns its living renting space on mobile towers to telecom operators. A tower is built once, and every additional operator that hangs equipment on it pays rent on an asset that already exists. That is why the tenancy ratio, the average number of tenants per tower, sits at the centre of the case for owning the business. In the September 2026 quarter the ratio finally moved, to 1.63 from 1.62, after a period in which it had not changed. The company added 7,900 colocations, its term for each tenancy on a tower, and the number of tenancies was 5.9% higher than a year earlier.

Revenue did not keep pace with the tenants. Sales were 4.0% higher than a year earlier, and core revenue, the rental business the company reports separately, grew 3.9%. A year earlier, sales had been growing at 9.7%. More operators are on the towers, yet the money they pay is growing more slowly than their number.

Management gave three reasons. A tenant added partway through a quarter pays for only part of it, and the chief executive, Prachur Sah, said the full quarter of revenue arrives in the quarter after. The comparison is also harder than it looks, because revenue a year ago carried a one-off benefit of about 0.8%, the chief financial officer said. The third reason is different in kind: Sah acknowledged that contract renewals have muted the price escalations and loading charges that usually lift rent on existing tenancies. The first two fade as the quarters pass; the third acts on the rent itself. Asked whether revenue growth would hold at this pace or quicken, Sah would not commit to either.

Profit shows the same pattern from the cost side. Operating profit before depreciation, as the filed results record it, was only 0.6% higher than a year earlier, but the year-ago quarter included write-backs of about ₹200 crore from collecting overdue receivables from a major customer, so the underlying gain was larger. Most of that came from rent: by our arithmetic from the reported figures, the rise in core rental revenue was more than six times the gain from a narrower energy loss. Indus buys power and diesel for its sites and recharges tenants for it, and the gap between the two, the energy margin, narrowed to minus 3.6% from minus 4.8% a year earlier, helped by an 11% cut in diesel use. The improvement is recent: the margin had been minus 4.6% the quarter before. Interest costs also fell, by 9.6%.

Depreciation took back the reported gain. The charge rose 7.9% on the year, and profit before tax ended 2.3% lower. Excluding the year-ago write-back, profit still grew, as a calculation from the filed results shows, and the chief financial officer said profit after tax rose 6.4%. The depreciation charge grows with the asset base: fixed assets were 9.1% larger than a year earlier, more than twice the growth in sales. When an analyst asked why spending per new tower looked high, Sah declined to give a range for upgrade costs: "I don't even want to give a range because it can be with minimal CapEx or it can be a significant amount of CapEx."

The tenancy ratio is how that growing asset base is meant to pay for itself, and this quarter the tenants did arrive. What the results do not yet show is the rent following them. If the timing explanation holds, the colocations added last quarter earn a full quarter of revenue in the current one, and sales growth should pick up when it is reported. If it does not, the renewals are doing more of the work than management has quantified.