The price target on Indus Towers has been cut by Jefferies to ₹375 from ₹530 earlier. The revised price target implies a downside potential of 14% from current levels.
Jefferies has cited two major reasons behind its downgrade for Indus Towers.
First, there are site renewal risks that have bunched up over the second half of calendar year 2026 and the first half of calendar year 2027. A large number of sites that were set up by the company in the second half of 2016 and the first half of 2017 will be up for renewal during this period.
“A moderation in incremental site additions at an industry level is likely to increase competition for any large renewals, which in turn, may require Indus to either offer a higher discount during renewals, or run the risk of the tenant shifting to other tower companies,” Jefferies wrote in its note.
Second risk highlighted by Jefferies is the elevated capex levels for the company due to higher growth and maintenance capex, which will impact Indus Towers’ earnings growth as well as Free Cash Flow and subsequent payouts.
Despite a 30% reduction in tower additions during the first nine months of financial year 2026, Indus Towers’ capex has increased by 38% from last year. Adjusting for the input tax credit reversal, that number is up 20%.
The rise in capex is due to a 94% year-on-year increase in maintenance capex, which is 25% of the overall capex of the company, as an ageing portfolio has increased maintenance requirements. “This is unlikely to moderate in our view,” Jefferies wrote in its note.
Therefore, it has raised its financial year 2027 and 2028 capex estimates by 18% to factor this in and expects the capex to remain elevated in the ₹7,200 crore and ₹8,000 crore range over financial year 2026-2029.
Due to these risks, Jefferies has cut its revenue and Profit and Tax (PAT) estimates by 2% to 6% to factor in the risks, post which, the stock offers a 3% Earnings Per Share (EPS) growth and 4% yield. Risks on the growth outlook should weigh on Indus Towers’ re-rating potential as well, as per Jefferies.
“We cut out target multiple to 6.5x Enterprise Value to EBITDA to factor this and downgrade the stock,” Jefferies said in its note.
Shares of Indus Towers ended 0.4% lower on Monday at ₹436. The stock has remained flat so far this year.
