INDUSTOWER Q2 FY27 Earnings Call: First Africa Towers Go Live, EBITDA Margin Expands To 54.4%

INDUSTOWER held its Q2 FY27 earnings call on October 27, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Steady Quarter with Margin Expansion, Flattered Comparisons

• Revenue of Rs.85.2 billion, up 1% QoQ and 4% YoY — core rental revenue rose 1.3% QoQ to Rs.54.5 billion on co-location additions, asset loading and accelerated network rollout by major customers; core revenue grew 3.9% YoY vs Q2 FY 2025-2026.
• EBITDA of Rs.46.3 billion, up 2.5% QoQ — margin improved 80 bps QoQ to 54.4%; the Q2 FY 2025-2026 base included ~Rs.2 billion of writebacks from collection of overdue receivables from a major customer, adjusting for which EBITDA grew 5.2% YoY.
• PAT of Rs.17.9 billion, up 2.7% QoQ — adjusted for the prior-year writeback, PAT grew 6.4% YoY vs Q2 FY 2025-2026.
• Trailing 12-month pre-tax ROCE of 25.3% and post-tax ROE of 19.2% — as of Q2 FY 2026-2027; Q2 free cash flow of Rs.14 billion provides flexibility for sustainable, value-accretive capex.
• Energy margin improved to -3.6% — from -4.6% in Q1 FY 2026-2027 and -4.8% in Q2 FY 2025-2026, aided by diesel optimization, better electricity-consumption visibility and advanced battery adoption.
• YoY revenue comparison carries a one-off drag — CFO Abhishek Maheshwari flagged ~0.8% of overall revenue reported in Q2 FY 2025-2026 as a one-off benefit weighing on the Q2 FY 2026-2027 YoY comparison.

Tenancy Ratio Ticks Up; Tower Adds Draw Analyst Scrutiny

• Tenancy ratio improved from 1.62 to 1.63 in Q2 FY 2026-2027 — ending a period of stability; the company added ~2,900 macro towers (up 5.6% YoY) and 7,900 co-locations (up 5.9% YoY), taking the base to ~270,500 towers and ~440,200 co-locations (~454,200 including leaner sites).
• 1,700 tenancies added in Q2 FY 2026-2027 — MD Prachur Sah said growth is tracked as towers/tenancies regardless of technology, with 5G being eventual loading on the same tower rather than a separate category.
• Tower additions of ~2,800-2,900 flagged as a Q2 low — analyst Satinder Singh Bedi (Eon Infotech) called ~2,800 the lowest Q2 in four years; management declined to guide, noting FY24 was the rollout peak and the current pace is robust for the country, driven by customers' network expansion plans.
• Leaner tower additions collapsed to 13 in Q2 FY 2026-2027 — from ~2,400 in Q4 FY 2024-2025; management attributed the trend to customers' network planning shifting from leaner-tower-led expansion toward macro/bigger towers, not to Indus's ability to deploy.
• Order book visibility described as strong — management reiterated visibility from major customers for Q3 FY 2026-2027 and coming quarters, with a large single-tenant (1T) tower base available for second tenants; on an expired tower agreement and a customer's reported plan to raise bank debt, management declined to speculate.
• Industry demand backdrop supportive — per TRAI data, India's 5G subscriber base grew 36 million in Q1 FY 2026-2027 to exceed 463 million; the industry added ~30,000 5G BTSs in Q2 FY 2026-2027 to ~593,000 installed, with deployment focus shifting toward network densification.

Early Rollouts On Plan; Metrics Deferred to Q3 FY27 Onward

• First towers deployed in Zambia and Uganda in Q2 FY 2026-2027 — revenue generation has already started; Nigeria deployment is set to begin in Q3 FY 2026-2027, with early capex per tower within plan, validating the cost model.
• Detailed Africa KPIs deferred — management intends to share operational and financial metrics from Q3 FY 2026-2027 onward as the portfolio reaches representative scale; no capex figure was provided for end of FY 2026-2027.
• Airtel remains the primary anchor customer in Africa — no agreements have been signed with other telcos in that market so far; engagements have been initiated beyond the anchor customer.
• Capex-per-tower advantage framed as capability-driven — MD Prachur Sah said capex per tower in the industry "doesn't depend on scale" but on engineering setup, experience and vendor ecosystem; Indus is leveraging BOQ cost-optimization learnings from India and its standing as one of the highest tower roll-out companies globally over the last few years.
• No quantification of the Africa capex differential yet — management said it will share "flavor" only after building "materiality" in Africa deployments (period unspecified).

Structural Energy Deflation Emerges as a Margin Lever

• Power and fuel expenses rose only 3% YoY in Q2 FY 2026-2027 — versus tower growth of 6%, with diesel consumption down 11% YoY; management attributed the deflation to structural initiatives: ~49,000 solar sites deployed by end-September 2026, digital/AI infusion in fuel operations planning, and the lead-acid-to-lithium-ion battery transition now at meaningful scale.
• Solar portfolio expanded to 49,000 sites — ~3,000 sites solarized in Q2 FY 2026-2027; installed renewable capacity grew to 297 MW from 259 MW in Q1 FY 2026-2027.
• Energy margin improved ~1% YoY in Q2 FY 2026-2027 — management called the cost initiatives long-term and sustainable but noted seasonality and operating efficiency can push the margin either way; no explicit margin guidance given.
• Network uptime improved to 99.97% — from 99.955% sequentially, despite severe floods in Northeast, Bihar/Jharkhand and UP East; frontline teams restored affected networks.
• Escalation covers most OPEX inflation — contractual escalation applies to the standard tower rate (an analyst noted the 2.5% annual escalation has not fully flowed through in the past); management said there is no additional pass-through beyond escalation during high inflation and the escalation waiver should be assessed over a longer horizon.

InvIT Suggestion Acknowledged but Unanswered; IBS Kept Opaque

• Analyst proposed an InvIT structure for the annuity business — Satinder Singh Bedi (Eon Infotech) suggested optimal gearing rather than the current net cash position, a buyback funded by excess cash, and a three-year roadmap with stretch targets for FY29 or FY30, citing the unmoved stock price despite good execution; management acknowledged the suggestions ("Sure, thank you") but gave no commitment, roadmap, or capital-structure guidance.
• Capex-per-tower optics questioned — analyst Vineet Banca (Nomura) flagged implied growth capex per tower of ~Rs.67 lakh in Q2 FY 2026-2027 vs stated new-tower capex guidance of Rs.20-25 lakh per tower; CFO Abhishek Maheshwari attributed the gap to CWIP, which rose ~Rs.250 crore QoQ in Q2 FY 2026-2027, with towers to roll out from Q3 FY 2026-2027 onward.
• Management cautioned against dividing capex by tower count — MD Prachur Sah noted tenancy additions, 5G upgrades and solar installations also carry capex; upgrade capex per existing tower is site-specific and bespoke, and management declined to quote a range.
• No separate IBS revenue disclosure — in response to Vineet Banca (Nomura), CFO Abhishek Maheshwari said the company generally does not share IBS revenue separately; IBS is a very small part of overall rental revenue, with IBS count and tenancy broadly in line with the overall portfolio.
• Contract duration affirmed at 10 years minimum — after analyst Kunal Vora flagged declining average residual contract period and minimum lease rental receivables QoQ in Q2 FY 2026-2027, MD Prachur Sah said no contract is signed below the standard term, and CFO Abhishek Maheshwari confirmed all new onboardings and renewals carry a minimum 10-year term.

Growth Momentum Expected to Continue; No Hard Guidance

• Management expects growth momentum to continue — citing healthy order book visibility, active collaboration with one major customer on planned rollouts, and confidence in expanding and retaining co-locations from all major customers.
• Rental growth declined to be confirmed as accelerating — India rental revenue growth ran at 4-5% in recent quarters through Q2 FY 2026-2027; MD Prachur Sah said growth will remain commensurate with tower/tenancy deployments, citing quarter-level timing mismatches, with overflow revenue from tenancies deployed in Q2 FY 2026-2027 still to come.
• No forward tower-add run-rate offered — management declined to guide on whether Q3 FY 2026-2027 will be higher or lower, reiterating a very strong order book for both towers and tenancies.
• Tenancy renewal remains under discussion — no incremental updates shared; the company positions itself as a competitive third-tenant option with lower operating costs than a single-tenant alternative.
• Technology-enabled enterprise agenda progressing — management said the focus is expected to enhance competitive position, customer delivery and capital efficiency; ESG rating from CRISIL improved from 57 to 63, and the "Saksham and Pragati" CSR initiative impacted over 11 million lives in Q2 FY 2026-2027.
• Government support for smart meters on telecom towers — management noted this has reinforced telecom infrastructure as a priority consumer category, with ~140,000 sites equipped with smart meters over the last three years.