Jefferies Downgrades Indus Towers to Underperform, Shares Decline Nearly 4%

Indus Towers Shares Decline 4% Following Double Downgrade by Jefferies

Shares of Indus Towers declined nearly 4% to Rs 421.45 apiece on April 15, following a double downgrade by global brokerage Jefferies, which cut its rating on the stock to "underperform" from "buy." The brokerage also reduced its target price by 30% to ₹375, flagging rising concerns over tower contract renewals and sustained pressure from elevated capital expenditure.

Jefferies highlighted that nearly 10% of the company's towers installed during 2016-17 are due for renewal in the second half of 2026 and early 2027. This comes amid a slowdown in industry-wide tower additions, which could intensify competition among tower operators. The brokerage warned that Indus Towers may have to offer discounts to retain key clients such as Bharti Airtel and Vodafone Idea, or risk losing them to rivals. Even limited concessions to a single tenant could have a cascading impact across the tenant base, weighing on revenues.

The brokerage estimated that if 25% of these towers are not renewed, it could lead to a 2-2.5% decline in revenue and EBITDA for FY27 and FY28. Reflecting these risks, Jefferies has lowered its net profit forecasts for the company by up to 6%, factoring in both renewal uncertainty and higher depreciation costs linked to increased capital spending.

Despite a nearly 30% drop in tower additions during the first nine months of FY26, overall capital expenditure rose significantly, driven by higher maintenance costs and continued investments in energy infrastructure, including solar solutions and lithium-ion batteries. Maintenance capex alone has nearly doubled year-on-year, indicating an ageing tower portfolio that will require sustained investment. Jefferies expects annual capital expenditure to remain in the range of Rs 72,000 crore-Rs 80,000 crore between FY26 and FY29, which could constrain free cash flow generation and limit dividend payouts.

| Forecast | FY27 | FY28 | FY29 | | --- | --- | --- | --- | | Free Cash Flow (Rs) | 15-Rs 19 per share | 15-Rs 19 per share | 15-Rs 19 per share | | Capital Expenditure (Rs crore) | 72,000-80,000 | 72,000-80,000 | 72,000-80,000 |

Jefferies forecasts modest growth for Indus Towers, projecting a revenue CAGR of 4% and earnings growth of 3% between FY26 and FY29, with EBITDA margins likely to remain largely range-bound. The brokerage noted that subdued growth prospects and uncertainties around contract renewals could cap any meaningful re-rating of the stock.