Bad debt provisions on Voda Idea fee delays drag Infratel this autumn internet

Tower infrastructure provider Bharti Infratel’s fiscal fourth quarter performance was predominantly dragged due to provisioning for bad debt, arising from likely delay in payments, mainly from Vodafone Idea, analysts said. On Friday, Infratel stock plunged 10 percent in late trade to Rs 149.55 on the BSE.

“While rent and employee costs increased 4 per cent-6 percent YoY, other costs jumped 59 percent YoY and 63 percent QoQ likely due to higher provisions for doubtful debt with a delay in payments,” brokerage firm CLSA said in a report.

IIFL Securities believes the adjustment in the company’s earnings pertains to estimated Rs 200 crore bad debt provision pertaining to Vodafone Idea largely.

“BHIN has seen rise in receivable days in past 12 months and has now made provision for bad debt, which does not provide much comfort,” another report by brokerage ICICI Securities said.

The company’s fiscal fourth quarter costs increased 8 percent on year despite a 3 percent on year drop in power and fuel costs. With higher costs, its core earings before interest, tax, depreciation and amortization (Ebitda) margin fell a sharp eight percentage point on year to 55 percent, CLSA added.

Infratel posted a quarterly profit of Rs 650 crore, up 7 percent on-year boosted by lower tax and rise in gross and net tenancy additions, led by Indus Tower. But its net profit declined 18 percent on quarter.

“Normalised core rental revenue was up 4 percent YoY, 1 percent ahead of our estimates led by higher-than-expected rent per tenant to Rs40k/month, up 3 percent YoY,” CLSA said.

Bharti Infratel’s (BHIN) net tenancy base rose by 431, gross tenancy addition improved to 2,498, but rise in tenancy exits (2,067) is disappointing. “We see risk from higher than expected tenancy exits by Vodafone Idea, and wait for update,” ICICI Securities said.

CLSA said that in the changing industry landscape, Vodafone Idea’s insolvency risk is lower and a review of Infratel’s merger terms with Indus would also be a positive. The company has extended the long-stop date for closure of the deal for the fourth time to June 24.

―Investing Guide