Short-term relief for Indus Towers as Vi clears dues, long-term uncertainty lingers

Vodafone Idea Limited (VIL), India’s third-largest telecom operator, has cleared a significant portion of its outstanding dues to Indus Towers, marking a notable development in their ongoing financial relationship. This repayment comes as a much-needed relief for Indus Towers, which had been carrying a high level of receivables from VIL over several quarters due to the latter’s prolonged financial stress.

The payment significantly improved Indus Towers’ financial position during the quarter ended June 2025, helping the company generate a free cash flow of Rs 1,570 crore. This strong cash generation enhances Indus’ ability to meet its own obligations, invest in strategic initiatives, and potentially return value to shareholders, either through dividends or reinvestment.

During the same period, Indus Towers reported a sharp reduction in trade receivables, which fell by Rs 406.4 crore,a clear sign that overdue payments are beginning to be recovered. Notably, VIL alone repaid Rs 88 crore in the first quarter of FY26, underlining a more serious effort to address its past dues and strengthen its relationship with critical infrastructure partners like Indus.

The repayment also signals an incremental improvement in VIL’s operational discipline and cash flow management, although the company still faces substantial financial challenges ahead. For Indus Towers, the receipt of long-pending dues not only eases immediate cash flow pressures but also reduces credit risk exposure to its largest clients, particularly important in a capital-intensive industry like telecom infrastructure.

The company has decided to utilise the available free cash for strategic purposes.
“We have recovered the majority of our outstanding receivables. As part of our cash management strategy, we have either reduced debt or deployed the cash towards a highly strategic acquisition,” said Indus Towers CEO, Prachur Sah, during the company’s earnings call on Thursday.

Looking ahead, it remains uncertain whether VIL will be able to continue making timely payments in the coming quarters. The operator has previously indicated that its financial stability largely hinges on support from the Department of Telecommunications (DoT), and that the outlook remains uncertain.

Vi’s AGR dues pose an ongoing risk to financial stability 

VIL must begin making its deferred AGR (Adjusted Gross Revenue) payments in accordance with the Supreme Court’s directive and the payment schedule issued by the DoT. However, given its ongoing financial distress, the company is unlikely to meet these obligations without some form of government intervention. Mounting losses, a shrinking subscriber base, and restricted access to fresh capital have left VIL in a vulnerable financial position.

If AGR liabilities are enforced without relief measures, VIL’s already strained cash flows could deteriorate further, potentially threatening the company’s survival. To maintain its operations and prevent further financial decline, it is critical that the government consider extending assistance, whether in the form of a payment moratorium, equity conversion, or other support mechanisms. Such measures would not only help stabilise VIL but also ensure continued competition and service continuity in India’s telecom sector.

In reference to the evolving situation, Indus Towers noted, “The Board will continue to closely monitor developments and reassess its position by the end of the financial year. Nevertheless, the Board remains fully committed to delivering shareholder value, including resuming distributions as soon as circumstances permit.”

Meanwhile, the outlook for Indus Towers’ core business remains cautious. With telecom operators slowing the pace of 5G tower deployment, likely due to financial constraints, regulatory delays, and lower-than-expected consumer uptake, Indus may see a slowdown in its growth trajectory. The company’s primary revenue model is dependent on the rollout and maintenance of telecom infrastructure, particularly mobile towers. A reduced investment in new installations and upgrades directly affects its contracted work, potentially dampening its growth prospects until the 5G rollout accelerates again.