Indus Tower - Annual Report and Financial Statement Analysis PDF

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This is an assignment on Annual Report and Financial Statement analysis of Indus Tower....

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Project Report on Annual Report of Indus Towers Ltd. Submitted to - Dr. Renuka Sharma Submitted by - Jatin Phirani MBA - F&B (2021-23) Roll No. – 2120982560

Content – Section-A 1. Introduction about the Company 2. Introduction of the Industry (Current Scenario, Growth of the sector, Global Scenario, Major players etc.) 3. What type of information is given in the annual report of a company? 4. Mention some performance highlights given in the annual report and interpret them. 5. Who are the auditors (specify the names or audit company) of the company? 6. How many reports are discussed in the annual report, viz., Directors’ report, sustainability report, responsibility report auditor’s report etc.? 7. What issues are discussed under the title “Management Discussion and Analysis”?

Section-B – (Financial Statements) 1. Income Statement 2. Various and Major components of Income 3. Various and Major Components of Expense 4. Depreciation policy and method 5. Bad debts and related provisions 6. Allocation of profit 7. Balance Sheet 8. Asset Components 9. Debt to Equity 10. Change in proportion of Long term liabilities to short term liabilities 11. Change in proportion of debt to equity in last 5 years 12. Change in proportion of reserves and surplus in last 5 years 13. Change in Shareholder’s Capital in last 5 years 14. Dividend Distribution 15. Financial Analysis- Dupont, common size, cash flow etc. 16. Recent news

1. Introduction about the Company

About Indus Towers Ltd. One of the largest digital communications infrastructure providers, Indus Towers Limited (formerly Bharti Infratel Limited) provides affordable, high-quality and reliable passive infrastructure services to the growing digital connectivity needs of India. History Indus Towers Limited was founded in November 2006. It was incorporated with an objective to provide shared telecom infrastructure to telecom operators on a nondiscriminatory basis. In 2017, reports suggested that Bharti Infratel, who already owns 42% of Indus Towers, was looking to acquire the 53% stake in Indus Towers,[11] currently owned by Vodacom Group Plc. On 25 April 2018, Bharti Infratel and Vodafone Group issued a joint statement announcing the merger of Bharti Infratel and Indus Towers to create the second largest telecom tower company in the world.

Core Values

PAN INDIA PRESENCE

WHY MERGER WITH BHARTI INFRATEL? -An effective collaboration strengthens the foundation for sustained value creation. The merger of Bharti Infratel and erstwhile Indus Towers reiterates our ambition to successfully fulfil the nation’s digital connectivity needs. Today, the merger of two legacy entities positions Indus Towers as the largest passive infrastructure company in India and one of the largest in the world.

Business Model As an integral player in the digital ecosystem, we play a fundamental role as a service provider to bridge the digital gap and render cost-effective digital infrastructure services that are sustainable and future-ready.

Products

Services 1. Tower Operations Center (TOC) NextGen Service Centric Tower Operations Center (TOC)-

The Indus Tower Operations Center (TOC) is a state-of-art facility that is designed to cater to one of the most fundamental requirements for company-wide operations. Customer Delight remains at the centre of everything we do from the facility. With our service footprint expanding to 22 telecom circles across India, our new TOC is the biggest operations in the NOC industry, managing 200+ Operations Support System under one roof. The NextGen offering provides services across all business functions, including Operations, Energy, Estate, Revenue Assurance, Technology, and Human Resource. It’s a combination of Man and Machine, enabled by Artificial Intelligence (AI) and Machine Learning (ML). The TOC provides round-the-clock surveillance services to all of Indus’ telecom sites across India through centrally managed operations. The programmed surveillance provides actionable insights on-the-go to the field personnel via an automated calling system followed by an SMS. Real-time alerts on faults enable improved tracking and maintenance to ensure the network infrastructure is always up and running. Our Cloud-based call center enables prompt servicing across all circles and features real-time monitoring of calls. Moreover, each call being made from the TOC is accompanied with the full History of Site to improve operational efficiency and effectiveness.

2. Green Technology Energy Solutions Blue Sky Thinking For Green Outcomes We found that majority of energy in telecom tower shelters was being consumed by air conditioners rather than active telecom equipment in order to keep instruments at the ambient temperature. This set in motion our Shut AC initiative that sought to replace air conditioners with free cooling units, which consume less energy and are specifically designed to control the internal environment of cell site enclosures. We initiated the Indoor-Outdoor conversion, achieved through natural cooling that works on the principle of flow of air in differential temperatures. The Shut DG: Green Sites project was conceived to run telecom network operations without using diesel as power backup, by instead running the network on a more environment-friendly advanced battery bank solution, without compromising on the network uptime. Relentless in the pursuit of our goal, we also devised innovative ways of deploying batteries using the combo solution, the NCU, turbo solutions, variable speed diesel generator sets and micro cooling solutions that target sites with temperature-sensitive equipment and cool them separately.

Major Customers Indus Towers Limited is an independently managed company offering passive infrastructure services to telecom operators and other wireless services providers such as broadband service providers. Their portfolio of Customers includes leading telecom service providers such as Airtel, Vodafone+Idea, Reliance Jio,

MTNL and BSNL. Having said that, they operate our business on an operator-neutral and nondiscriminatory Platform.

Total Towers & Co-locations Indus Towers Limited has over 180,997 towers and 325,355 co-locations (as on 30th June 2021) and a nationwide presence covering all 22 telecom circles.

2. Introduction of the Industry (Current Scenario, Growth of the sector, Global Scenario, Major players etc) Telecom Tower Infrastructure Industry The telecom revolution is one of the biggest success stories post-liberalization of India that has helped the country’s visibility in global markets. Today, India is the second largest telecom market and the largest data consumer, globally. With 1.3 billion Indians accessing voice and data services at the world’s lowest tariffs, the ubiquitous wireless network in India is unmatched for its reach and impact on people’s lives. This unprecedented success of India’s telecom sector is attributable to wireless growth, backed by a robust telecom tower infrastructure which has played a pivotal role in bridging the digital divide and facilitating ubiquitous mobile connectivity. The Indian tower industry has laid a strong foundation of growth for the telecom sector and has supported the sector in keeping pace with the fast-paced technology advancements.

Evolution of Tower Infrastructure Industry In Year 2000 - DoT invited applications for IP-I and IP-II registrations in the year 2000. Prior to that, telecom service providers were provisioning towers and other passive infrastructures on their own and there was no sharing Pre-2005 -Minimal infrastructure sharing as Towers operated under integrated model (part of the Operators’ domain Post 2005 - The telecom infrastructure providers were given on lease/ rent, to telecom service providers (TSPs) for providing cellular telephone services by promoting 'Sharing of Towers

Types of tower companies: • Independent tower companies (pure play operators) like ATC, GTL, TowerVision, etc • Joint ventures like Indus tower which is a joint venture by Airtel, Vodafone and Idea • Formed though de-merger like Reliance Infratel which is a wholly owned subsidiary of RCom

Current Scenario As telecom operators are focusing on increasing market penetration with limited capital expenditure, it is favourable for telecom operators to lease towers from tower companies, reducing costs considerably and allowing telecom operators to focus on core marketing activities.

Leasing towers from tower companies also enables new telecom operators to rollout services in record times. In India, over 10,00,000 + telecom towers are established with an enhanced national spread of signalling. They are using Diesel generators to provide power to these towers. The telecom companies are estimated to be the second-biggest consumers of Diesel in the country, behind only the Railways. Apart from leading to high carbon emission, diesel usage by telecom towers is also a big drain on the exchequer as the loss to the government on account of the cheaper fuel is pegged. Wireless networks are expanding coverage — the area served by their specific service. Many are also advancing into faster 5G networks and 4G LTE, also known as long-term evolution, the highest grade of 5G and 4G. Both of these trends have helped accelerate the demand for towers. In addition, as wireless data speeds have increased, so have software applications. Competitive pressures aside, the growth in subscriber base has necessitated expansion of network coverage, which in turn has driven the Telco’s to make sizeable investments in active and passive infrastructure. The Indian Telecom Infrastructure industry boasts of IP-I registration holders that establish and maintain assets such as towers, Right of Way (ROW), duct space and dark fiber for the purpose to grant on lease/rent/sale basis to the Licensees of Telecom Services under Section 4 of the Indian Telegraph Act, 1885. Over the years, IP-1 players have played an important role in the proliferation of affordable wireless services in the country by creating shared infrastructure for the Telecom Service Providers (TSPs) which ensures opex and capex efficiencies, faster time-to-market and avoids any duplication across the value chain which would otherwise lead to wastage of resources. India has been at the helm of passive infrastructure sharing, a model that has been emulated globally. Since 2010, number of towers has quadrupled to reach more than 600,000 towers at present providing ubiquitous quality services to 1.16 Bn consumers (Sep’20 – Source: E&Y/ TAIPA).

In the last year, the COVID-19 pandemic has brought the critical role of telecom infrastructure in connecting the nation to the forefront as wireless networks saw a surge in volumes as traffic migrated to homes with limited fixed-line capacity to support this demand. The infrastructure industry continues to support the requirements from TSPs as more sites are needed to keep up with the 4G data demand. As the country evolves towards 5G, IoT, enhanced fiberization in the coming years, the next investment cycle will warrant infrastructure players to play a greater role that goes beyond passive infra sharing.

GROWTH OF THE SECTOR PAST: The Indian telecom industry has undergone a transformational change in the last decade. Mobile operators successfully adopted innovative models to sustain growth followed by focus on operational prudence in recent years. The tower industry has been a key enabler for such models by allowing sharing of infrastructure along with operational excellence. In the past decade, India has emerged as one of the fastest growing digital economies and the largest consumers of data globally. The telecom tower industry has been a pivotal force in steering the connectivity revolution. Between 2007 and 2020, number of towers have grown over two-fold at a CAGR of 7.1% to reach 606,300.

COVID-19 AND IMPACT: The year 2020 emphasised the importance of being connected, virtually. Catering to a massive demand for data and uninterrupted network connectivity, Telecom tower companies played an integral role to keep people closer to each other through digital connections. As the world reeled under the novel Coronavirus, ‘social distancing’ and ‘work from home’ arrangements emerged as need of the hour. What transpired thereafter, was a phenomenal spike in demand for seamless network connectivity to keep businesses operational and people connected, despite social distancing protocols. In India, 15000+ Towers are added in FY-2020-21

INNOVATION AND NEW OPPORTUNITIS: -With innovation at the core, India has been one of the pioneers in passive infrastructure sharing, which is now a global hallmark. The “towerco” business model unlocked significant gains – from rapid market expansion and faster time to market, to opex and capex efficiencies, and offloading capex burden from telecom operators. Today, India has 83% of its tower sites owned by towercos, only second to China (100%).

-Tower-sharing is one of the significant growth drivers for the telecom industry, as it provides benefits like cost reduction and faster data rollout. The telecom tower industry has gained prominence as an independent industry, mainly in India and the United States. - During the year, the TSPs have announced various updates on their 5G initiatives in plans. On October 20, 2020 Qualcomm Technologies, Inc. and Reliance Jio Platforms Limited (RJio) along with its wholly owned subsidiary Radisys Corporation announced their expanded efforts to develop open and interoperable

interface compliant architecture based 5G solutions with a virtualized RAN. This work is intended to fast track the development and roll out of indigenous 5G network infrastructure and services in India. Earlier on July 15, 2020, Reliance Industries in its Annual General Meeting (AGM) had said that RJio had designed and developed a complete 5G solution from scratch and it intends to launch 5G service in India using 100% home grown technologies and solutions. -Since the announcement of the smart city project in June 2015, Tower Industry is a player in this space, developing scalable models for various projects. Industry ability to provide core digital infrastructure for smart cities makes them an integral part of the ecosystem to drive development and inclusive growth of the nation.

GLOBAL SCENERIO OF INDUSTRY The global telecom towers market was valued at 4,342.520 thousand units in 2020, and it is projected to be 5,308.088 thousand units by 2026, registering a CAGR of 3.34% over the period 2021-2026. With the outbreak of COVID-19, the telecom industry has witnessed a significant increase in demand for internet services due to a major chunk of the population staying at home and remote working conditions. The increase in people working from home has led to an increase in demand for downloading, online video viewing, and communication through video conferencing, all of which are leading to increased network traffic and data usage

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Over recent years, there has been a surge in the installation of telecom towers. The telecommunication exchange websites estimated that over 250,000 towers would be erected globally in 2020 alone, with operators from China and India contributing the highest to the new tower installations. These towers are operator-owned tower companies, including new towercos owned by companies, such as Vodafone, Reliance Jio, Orange, and Hutchison. Further, the operator-owned towerco sector was developed by the equivalent of more than eight edotcos in the previous year. Operator-led towercos now own 55.6% of the world’s towers, up from 52.7% the same time the previous year.

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The telecom tower industry has drastically evolved over the past decade. The core towerco proposition and business models have been successfully adapted to match the demands of new markets in Africa, Southeast Asia, Europe, China, and, most recently, the Middle East. There is relatively little territory left for the industry to colonize.

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The operator-owned segment may dwarf the independent towerco sector, but China Tower still distorts its market share. Excluding China Tower from the consideration, operator-led towercos may own 24.6% of the towers globally and independent towercos 22.2%. The growth of the operator-led towercos and independent towercos has principally come at the expense of Mobile Network Operators (MNOs)-captive sites.

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Installation across a few regions was stopped, considering the local public’s fear of the environmental damage that the presence of the mobile towers may cause in the neighborhood. For instance, the residents of Clear Lake Riviera, California, have cited fire danger as their primary concern toward installing a telecom tower. Telecom operators like Verizon and AT&T are finding a need for the tower in the region, however, the concerns of the public have been delaying the process.

Major Players (Global) 

Indus towers Ltd.

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Helios Towers Africa

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American Tower Corporation

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SBA Communication Corporation

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AT&T

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GTL Infrastructure Ltd

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T-Mobile Towers

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Crown Castle International Corporation

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China Tower Corporation

Major Players (Domestic) 

Indus Towers Ltd.(Bharti Infratel)

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Reliance Infratel Ltd.

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Viom Networks

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GTL Infrastructures

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BSNL-MTNL

3. What type of information is given in the annual report of a company? Various information provided by annual report other than about and business model are:

1.

Performance review – Performance and various financial components like revenue, EBITDA and ratios as shown below

2.

Risk Management - Risk identification and mitigation framework identifies significant economic, environmental, social and governance risks that can potentially influence our decision making, while impacting our ability to create value for the long-term and prioritize relevant actions to mitigate the risks

Below are the Various Internal & External Risks assessed:

Mitigation strategy, way forwarded and capital affected for above risks are also provided in the report.

3.

Stakeholder engagement - At Indus Towers, we align our long-term business objectives with the expectations and requirements of our stakeholders. We continue to build a transparent and effective communication model for our stakeholders that strengthens our resolve to fulfil organisational goals and build a sustainable business entity.

4.

Message from Chairman - Dear Shareholders, It is my privilege to address all of you, for the first time, as Chairman of Indus Towers, a Company formed by merger of erstwhile Indus Towers with and into the Company (formerly Bharti Infratel and now Indus Towers).

FY 21 marked a momentous year for the Indian Telecom Sector. While last year’s headlines were dominated by AGR dues, this year heralds the news of auctions, fund raising by telecom operators

and 5G readiness. –N Kumar

5.

Message from Managing Director & COE - Dear Shareholders, hope you are keeping well in these unprecedented and difficult times of the second wave of COVID-19 that our country is facing. Let us keep our head down to protect each other to the fullest extent possible.

“FY 21 has seen a strong operational performance by Indus Towers. We have increased our gross tower additions by 51%, 11,092 in FY 21 compared to 7,326 in FY 20 – which has been the highest in the last ten years – Bimal Dayal

6.

Board of Directors –

(i) Mr. N Kumar ...