Indus Towers shares get upgrades on hopes of dividend resumption; targets raised

Shares of Indus Towers Ltd. are trading over 3% higher on Tuesday, October 28, driven by two key factors, including strong quarterly results and optimism around Vodafone Idea's (Vi) prospects following potential adjusted gross revenue (AGR) relief.

Indus Towers posted a strong operational performance for the September quarter, with EBITDA margins expanding 180 basis points sequentially to 56.3%.

	Q1FY25	Q2FY25	Q3FY25	Q4FY25	Q1FY26	Q2FY26
EBITDA %	61.6%	65.7%	92.7%	56.9%	54.5%	56.3%

The improvement was aided by a ₹195.2 crore writeback of provisions for doubtful debts related to Vi, compared with ₹88.3 crore in the previous quarter. Vi has been paying most of its monthly dues on time.

Revenue rose 1.6% quarter-on-quarter and 9.7% year-on-year, while net profit climbed 5.9% sequentially to ₹1,839.3 crore.

Tower additions also saw an uptick compared with the previous quarter.

	Q1FY25	Q2FY25	Q3FY25	Q4FY25	Q1FY26	Q2FY26
adds	6174	3748	4985	14662	2468	4301

The Supreme Court's decision on Monday allowing the government to reconsider Vi's AGR dues has sparked optimism, as the relief could improve the telecom operator's cash flows over the next few years.

How does it help Indus Tower

A financially stronger Vi would be able to resume and complete its capex plan of ₹50,000-₹55,000 crore, which could, in turn, boost tenancy growth for Indus Towers.

What is the trigger going ahead

Brokerages believe dividend reinstatement could be a key trigger. IIFL sees a high likelihood of Indus reinstating dividends or launching a share buyback by the end of FY26.

Jefferies upgraded Indus Towers to 'Buy' with a target price of ₹425, citing an expected 6% profit CAGR over FY26-28 and a 7% dividend yield, which make the risk-reward attractive.

CLSA has a 'High Conviction Outperform' rating on the stock, with a target price of ₹520.

IIFL, meanwhile, said its analysis suggests limited downside risk for Indus in all scenarios where Vi's survival is assumed.

It has raised its target price from ₹369 to ₹407, as it now assumes a 0% probability of Vi's collapse versus 15% earlier.

The company will hold its post-earnings conference call today at 2:30 pm.