HDFC Securities Pick of the Week 11th Jan'26: Indus Towers Limited

HDFC Securities has selected Indus Towers Ltd. (NSE: INDUSTOWER) — India’s largest telecom passive infrastructure provider — as its Pick of the Week. The brokerage recommends buying the stock in the ₹430–440 range and adding on declines in the ₹393–401 band. HDFC Securities has assigned a base case fair value of ₹470 and a bull case fair value of ₹501 over a 2–3 quarter time horizon, supported by strong 5G rollout momentum, improving tenancy additions, high network coverage, stable long-term contracts, and a robust balance sheet.

Q2FY26 Result: Stable Growth with Margin Normalisation

Indus Towers reported steady performance in Q2FY26, with revenue in line with expectations and profits above estimates. Consolidated revenue grew 9.7% YoY to ₹8,188 crore, supported by healthy tenancy additions and continued 5G deployments.

However, EBITDA margins moderated due to higher power and fuel costs and lower escalation benefits.

Key Financials — Q2FY26

• Revenue: ₹8,188 crore; up 9.7% YoY and 1.6% QoQ
• EBITDA: ₹4,572 crore; margin at 55.8%
• Net Profit (Adj.): ₹1,839 crore; down 17.3% YoY, up 5.9% QoQ
• Tenancy Addition: 4,505
• Tower Addition: 4,301
• Tenancy Ratio: 1.63x

Strategic Growth Drivers and Key Strengths

1. Strong 5G-Led Demand Visibility
   5G rollouts across India continue to drive tower additions, higher loading revenue, and long-term tenancy visibility. The company expects robust rollout over the next 4–6 quarters backed by a strong order pipeline.
2. Market Leadership and Scale Advantage
   Indus operates over 2.56 lakh towers and 4.15 lakh co-locations, with nationwide presence across all 28 telecom circles. It holds industry-leading market share and the highest tenancy ratio among peers.
3. Stable Long-Term Contracts
   Long-term Master Service Agreements (MSAs) with key customers such as Airtel, Jio, Bharti Hexacom, and Vodafone Idea provide revenue visibility and cash flow stability.
4. International Expansion into Africa
   Indus plans to enter select African markets including Nigeria, Uganda, and Zambia in partnership with Bharti Airtel, leveraging under-penetrated telecom markets and Airtel’s strong regional footprint.
5. Adjacent Growth in EV Charging
   Indus is exploring EV charging infrastructure as a long-term adjacent opportunity, leveraging its existing assets, power infrastructure, and operational capabilities.

Valuation & Recommendation

HDFC Securities’ Estimates

• Base Case Fair Value: ₹470
• Bull Case Fair Value: ₹501
• Time Horizon: 2–3 quarters

Recommendation

• Buy in the ₹430–440 range
• Add on dips at ₹393–401

At the current price of ₹433, the stock trades at ~13.4x FY28E EPS, offering attractive risk-reward supported by stable cash flows and structural growth.

Risks & Considerations

• Slower-than-expected 5G rollouts
• Regulatory or policy changes in telecom infrastructure
• Financial stress among telecom operators affecting tenancy or payments
• Rising power, diesel, or operating costs
• Execution and regulatory risks in African expansion

HDFC Securities’ View

Indus Towers is a structurally strong infrastructure play on India’s digital and telecom expansion. Its leadership position, high-quality assets, strong customer relationships, and long-term contracts provide earnings stability, while 5G rollouts, international expansion, and EV infrastructure offer incremental growth levers. With improving tenancy visibility, disciplined capital allocation, and a strong balance sheet, Indus Towers remains an attractive medium-term investment opportunity for investors seeking stable compounding in infrastructure-linked equities.