Why Indus Towers may not be a compelling bet right now; Here’s what Motilal Oswal has to say

Synopsis: Motilal​‍​‌‍​‍‌​‍​‌‍​‍‌ Oswal has a neutral stance towards Indus Towers, reasoning that there is a limited upside in the near-term due to factors such as a high capital expenditure (capex), the Africa segment being at a nascent stage, and more.

The shares of this company (Bharti Airtel Group), engaged in the business of setting up, operating, and maintaining wireless communication towers, are in focus after Motilal Oswal cited some concerns regarding its business. In this article, we will dive more into the details.

With a market capitalisation of Rs 1,08,349 crore, the shares of Indus Towers Ltd made a day high of Rs 413.55 per share, up by 1 percent from its previous day’s closing price of Rs 408.65 per share. Over the past five years, the stock has delivered a return of 79 percent, underperforming NIFTY 50’s return of 89 percent.

Analyst Comments

Leading domestic brokerage house, Motilal Oswal, has assigned a neutral rating on Indus Towers and has fixed a target price of Rs 390 per share, signalling a potential downside of 5 percent from its previous day’s closing price.

Indus​‍​‌‍​‍‌​‍​‌‍​‍‌ Towers’ stock came under the spotlight after the company announced that its UAE-based subsidiary has established two new subsidiaries to explore investments in African markets such as Nigeria, Uganda, and Zambia. Each company has an initial share capital of AED 3 lakh. 

Still, Motilal Oswal pointed out that the expansion to Africa is at a very nascent stage, and there is neither a clear investment amount nor a timeline. Therefore, the financial impact of this decision is not significant enough for the near term.

The brokerage also agreed that the company is winning new market shares in the tower installation sector and is positive about the renewal of most of Reliance Jio’s upcoming tenancies, which are mainly second or third tenancies and therefore have better margins.

However, the brokerage anticipates that a high level of capital expenditure will continue to weigh on returns in the short term. The brokerage further stated that it has removed its earlier assumption of Rs 2,000 crore bad-debt provisioning related to Vodafone Idea from its long-term estimates. Still, the benefit is mostly neutralised by the slower tenancy growth assumptions and high capex. Consequently, Motilal Oswal positions that any relief given to Vodafone Idea acts more like a boost to the mood than a real earnings driver; thus, the stock’s risk-reward at the current level is not favourable despite Indus Towers’ robust long-term ​‍​‌‍​‍‌​‍​‌‍​‍‌business.

Financial and Other Highlights

Indus Towers has reported an operating revenue of Rs 8,188 crore in Q2 FY26, representing a 10 percent growth compared to Rs 7,465 crore in Q2 FY25. Additionally, on a quarter-on-quarter basis, it grew by 2 percent from Rs 8,058 crore.

Regarding its profitability, it reported a net profit of Rs 1,839 crore in Q2 FY26, a decline of 17 percent as compared to Rs 2,224 crore in Q2 FY25. However, on a quarter-on-quarter basis, it grew by 6 percent from Rs 1,737 crore. 

Indus Towers Limited, part of the Bharti Airtel group, stands out as a top player in the telecom infrastructure scene, specialising in the provision and management of towers, small cells, and fiber backhauls for telecom operators. Beyond that, they also deliver innovative digital solutions such as LED streetlights, CCTV systems, digital boards, sensors, and public Wi-Fi. 

In conclusion,​‍​‌‍​‍‌​‍​‌‍​‍‌ Motilal Oswal’s view on Indus Towers reflects that the stock is primarily one to hold and monitor for the time being. Although the firm’s model is still viable and there are good prospects, such as the expansion in Africa and the renewals of tenancies, the company has very few initiatives for a significant re-rating of its value in the short term. 

Written by Satyajeet Mukherjee

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