Rajeesh’s Portfolio

Fantastic pick @Chirayu_Shah

In simple words, grow along with the industry and the company rather than to chase the after it has grown

Fortunately while I thought it was a strategic pick. It fits into this cigar butt style investment of Warren Buffett. If it crosses one hurdle of net receivables, there is nothing like this investment. In The 22 Immutable laws of Marketing, Al Ries and Jack Trout, this company clearly tells its investors what business it is into.

However, as a country, Indian mobile internet & telecom is one of the cheapest in the globe thanks to regulatory nature of Indian government to protect the customers and citizens of India.

Once the tables turn, the telecom sector will be a cashcow, depending on how we are currently addicted to digital products and data being compared to oil.

Without the internet, our salaries, stocks, mutual funds, everything is just a bunch of characters in the digital screen. As the telecom industry is penetrating further into rural India with Digital India is on the forefront, Booming AI ecosystem and approaching 5G & 6G, we can expect more dependency on to the telecom industry. To make this happen Indus towers is one of the key players , (basically market leader) who has to survive the Vodafone Idea Onslaught which has high 2G customers which Airtel and Jio cannot penetrate into. In my MBA days, this was one of the key topics to make us understand the type of markets. The telecom industry is (was) a Oligopolistic market now slowly turning into a Duopoly. However, this will be taken care by Indian government to maintain the competition.

Following the merger, Indus Towers is one of the largest tower infrastructure providers in the country and globally. The business of Indus Towers is to acquire, build, own, operate and maintain tower and related infrastructure. Indus provides access to their towers primarily to wireless telecommunications service providers on a shared basis, under long -term contracts. Indus Towers caters to all wireless telecommunication service providers in India. Indus has a nationwide presence with operations in all 22 telecommunications Circles in India.

As on Date, Bharti Airtel Limited along with its wholly owned subsidiary Nettle Infrastructure Investments Limited held more than 50% shares

Airtel plans to Indus Towers with its data centre business Nxtra, reported CNBC TV18. Further, Indus Towers cash would be used for Nxtra expansion, said the report. Airtel aims to make its telecom business asset light via Nextra and Indus Towers merger.

Consolidation of the majority shareholding in Indus Towers, and then merging it with the data centre business is apparently part of Bharti Airtel’s mega plan to of two-pronged strategy to capitalise on Indus Towers.

Indus towers key ratios:

• Company has been maintaining healthy ROCE of 30.08% over the past 3 years.
• The Company has been maintaining an effective average operating margins of 48.38% in the last 5 years.
• Company’s PEG ratio is 0.06.
• P/BV at ~3.5
• The company has shown a good profit growth of 21.86% for the Past 3 years.
• The company has shown a good revenue growth of 27.04% for the Past 3 years.
• Company has been maintaining healthy ROE of 22.66% over the past 3 years.
• The company has an efficient Cash Conversion Cycle of 72.23 days.
• The company has a good cash flow management; CFO/PAT stands at 1.96.
• The company has a strong degree of Operating leverage, Average Operating leverage stands at 46.90.

Yes I agree their YoY Sales is flat but their 3 year growth is 28% but for the same sales they have increased their bottom line. We need to look at the big picture for sales triggers

The company is holding Vodafone for its receivables threatening to discontinue its services for which Vodafone has responded with a negotiation of a softer repayment terms. Vodafone is a severe hurdle but too big to fail which will put many parts of India into dark if they don’t get into terms. Good part is Govt. (Or say to say SBI and LIC has put some life into Vi) and we can expect a good turnaround in long term at this price.

And most of all, their free cash flow has increased by 2.4x times YoY, they have even bought back their shares which is a big positive sign for shareholders and its part of staggering 29 different indices including the elusive MSCI index. I’m bullish. Markets are irrational, finding value is the hard part