Indus Towers Ltd
NSE:INDUSTOWER
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Indus Towers Ltd
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Welcome to the Indus Towers Limited First Quarter Ending June 30, 2023 Earnings Call. [Operator Instructions]Present with us on the call today is the senior leadership team of Indus Towers, Prachur Sah, MD and CEO; Mr. Tejinder Kalra, COO; Mr. Vinod Rao, Head Business Controller; and Mr. Dheeraj Agarwal, Head, Investor Relations.Before I hand over the call, I must remind you that the overview and discussions today may include certain forward-looking statements that must be viewed in conjunction with the risks that we face.I now hand over the call to our first speaker of the day, Mr. Prachur Sah. Thank you, and over to you, Mr. Sah.
Good afternoon, everyone, and thank you, and a very warm welcome to all the participants on the call. I'm pleased to present our business performance for the quarter ended June 30, 2023. Joining me today are my colleagues, Mr. Tejinder Kalra, COO; Vinod Rao, Business Controller; and Dheeraj Agarwal, Head, Investor Relations.The quarter gone by was especially satisfying for us on two fronts. Firstly, we continued to see good demand from one of our major customers, particularly in rural areas, resulting in the highest tower additions in a quarter for Indus Towers. Secondly, the collection level from one of our customers seen in Q4 sustained in Q1 as well.Before I dive into specific areas, I would like to take a moment to acknowledge the invaluable contribution of our field forces, who continue to work tirelessly to help Indus Towers accomplish its goal of enabling nationwide connectivity. Our teams on the ground ensured connectivity in Gujarat, Northeast region, Uttar Pradesh and Bihar amidst the Biparjoy Cyclone and harsh weather conditions, including flash floods witnessed in these areas. The team also managed to install sites in the tough terrain of Uttarakhand [indiscernible] and Siachen, located to the north of Jammu and Kashmir. This is a testament to our commitment to work with our customers to bridge the digital device.On the industry front, the government remains dedicated to accelerating the rollout of telecom infrastructure across the country and is taking necessary measures to ease the process. These include [indiscernible] for multiple power connections, option of applying for a power connection for telecom infrastructure through Gati Shakti Sanchar Portal, and mapping of different ministries through the Gati Shakti Portal to apply for [indiscernible]. These proactive measures by the government reflect its commitment towards fostering a conducive environment for business growth in the telecom sector.Moving on to the 5G, the top 2 operators continue to roll out 5G rapidly, having launched 5G services in more than 3,500 cities and towns, with pan-India urban coverage expected to be completed this year. Around 275,000 5G Base Transceiver Stations, or BTS, have been deployed by the operators across the country with average weekly run rate of deployment increasing significantly from approximately 7,000 in March to almost 12,000 in June. The aggressive rollouts by operators have translated into increased traction in our loading revenues. We expect to see good demand for new sites when the 5G network achieves a certain penetration level and creates the need for more capacity.As per Ericsson [Technical Difficulty], 5G subscriptions have reached 1.1 billion with 125 million additions seen in the March quarter alone. Total subscriptions are now expected to reach $5 billion by the end of 2028 with 5G subscriptions in India expected to reach $700 million mark by 2028, with a penetration of about 57% as per the report.Data consumption in the country remains robust, aided by the rapid uptake of 5G and the continued upgrade from 2G to 4G. The average data consumed per user per month across the top 3 operators grew 14% year-on-year to 21.2 GB for the quarter ended March '22. The total data consumed grew by 21% year-on-year in the March quarter. With the rising data consumption and the rapid integration of 5G, the demand for passive telecom infrastructure is expected to rise significantly to add more capacity, and we possess the capability to effectively cater to this increasing demand.In terms of our operational performance, I'm pleased to report that we have recorded our highest-ever tower addition in a quarter. We continued the tower addition momentum seen in Q4, underpinned by strong demand from our customers. During Q1, we had net additions of 5,410 macro towers and 5,048 corresponding co-locations. Our total macro towers and co-locations at the end of Q1 were 198,284 and 347,879 respectively, each growing by 6.3% and 3.4% on year-on-year basis. Our tenancy ratio remains industry-leading at 1.75. We continue to witness good demand for leaner tower, primarily for densification purpose in urban areas. Our new leaner tower additions stood at 936 in Q1 compared to [ 1,235 ] in Q4. Including leaner towers, our net co-location additions were at 5,984 in Q1 against 4,631 in Q4.Taking a cue from our operating performance, I would like to lay out our 4 key strategic priorities, where we have been driving a sharp focus. These are market share, cost efficiency, network uptime and sustainability. Let me spend some time to give you an update on actions taken and progress made on each of these strategies.Firstly, regarding market share, we have significantly increased our share in business of our major customers. And a total addition of 10,615 co-locations over the last 2 quarters is a testimony to the excellence work done by the team. We have formed a dedicated team to smoothen the deployment process and optimize delivery time through a real-time tracking mechanism and logistics alignment. By the way of digital interventions in our pan-India partner and supplier ecosystem and close coordination with customers to align with their requirements, we have furthered our competitiveness, helping us secure more wins.Secondly, on cost efficiency, we are working on optimizing both operating and capital expenses. Energy makes up for more than half of our OpEx, and diesel costs account for a large part of it. Our multiple initiatives have yielded an 8% year-on-year reduction in diesel consumption in Q1 despite increasing load from instillation of 5G equipment. These initiatives include augmenting our energy storage solutions. We added solar and [ pipe ] natural gas energy solutions on our tower sites during the quarter and also converted tower sites from indoor to outdoor, which further reduced diesel consumption. For sites with prolonged electricity outage, we are working with a technology partner to pilot an aluminum-air-based energy solution to replace these. There are various measures under implementation to improve the overall CapEx productivity such as tower design standardization, automation in procurement process for better cost control, and use of artificial intelligence and machine learning to enhance life cycle of equipment.Thirdly, on network uptime, which is a very critical -- which is very critical for our customers, we continue to maintain a very high uptime and delivered an uptime of 99.95% in Q1 FY '24. Please note that the quarter was marked by severe national calamities such as Biparjoy Cyclone in Gujarat and heavy rains and floods in areas of Northeast, Bihar and Uttar Pradesh, [ amongst others ]. Despite these challenges, our teams on the ground ensured a high level of uptime in these areas. We are embarking on digital transformation of our network by connecting all our towers to the largest real-time telemetry data system. This will make our monitoring and action planning more robust and faster, helping us further improve our industry-leading network uptime. The system will also facilitate auto and self-healing measures in the network, which will improve the productivity [indiscernible] and optimize the operating costs.Now, moving to sustainability, which stands as a key priority for the organization. We are guided by our ESG vision and launched Zero Goal Hai or zero is the target campaign during the quarter with the aim of achieving zero emissions, zero harm, zero waste, zero bias and zero tolerance to non-compliance. I have already highlighted our energy initiatives to reduce diesel consumption and adopt green sources of energy, which will drive control over scope 1 and scope 2 emissions. We have recently concluded inventorization of our scope 3 emissions, which will help us target key sources of emissions in our value chain.On gender diversity inched up from 6.3% to 6.5% over the quarter, aided by focused hiring programs and initiatives taken fostering an inclusive work culture. However, a lot more work needs to be done here, and we are currently focused to do the same. Regarding safety of our workforce, we are bringing in technological interventions such as introduction of virtual reality-based training modules and software applications for correction of unsafe driving behaviors.We have assessed all our major suppliers and partners on key ESG parameters. We are now engaging with them to drive more focus on the identified ESG opportunities to make our sourcing more sustainable. Our efforts towards ESG are being recognized, as we were [ adjured ] the Best Emerging Company of the Year at the prestigious Transformance forums. Indus also ranked 31st among 200 companies at Businessworld Sustainable World Conclave.I'd now request Vinod to take you through our financial performance for the quarter ended June 30, 2023, and I look forward to your questions. Over to you, Vinod, and thank you.
Thank you, Prachur, and good afternoon, everyone. I'm pleased to share the financial results for the quarter ended 30th June 2023. Reiterating our strong operational performance, this quarter marked the highest-ever tower additions in a quarter for Indus. As Prachur said, we added a total of 5,984 co-locations, including those on leaner towers, driven by network expansion by our major customer and interventions taken by us to optimize the deployment time.Moving on to financial performance for this quarter, starting with revenues, our reported gross revenue was at INR 70.8 billion, growing by 2.6% year-on-year. The core revenue from rentals increased by 2.7% year-on-year to INR 43.3 billion, aided by strong tower additions and loading from 5G rollouts. Please note that the Q1 FY '24 has an impact of non-recognition of revenue equalization assets for one of our major customers. On a quarter-on-quarter basis, total reported gross revenue and core revenue from rentals grew by 4.8% and 2.0%, respectively.Moving to profitability, the reported EBITDA grew by 51.3% year-on-year and 2% on a quarter-on-quarter basis to INR 35.1 billion. EBITDA margin was up by 16 percentage points year-on-year and down 1.4 percentage points quarter-on-quarter to 49.7%. Just to remind that the EBITDA figures of Q1 FY '23 were impacted by a provision for doubtful debt of INR 12.3 billion. Energy margins were lower at minus 3% in this quarter due to the seasonality, as our diesel consumption increases during this period. As Prachur had highlighted earlier, we are taking several initiatives to reduce our diesel consumption, which should help minimize our energy losses. Our reported PAT, profit after tax, stood at INR 13.5 billion, growing 182% on a year-on-year basis and declining 3.6% on a quarter-on-quarter basis. The significant increase in depreciation and lower other income impacted our net profit. Our reported pretax return on capital employed and post-tax return on equity for the rolling 12 months were at 13.8% each.Moving on to cash flows, the free cash flow for the quarter was INR 58 million, as our CapEx increased substantially to INR 22 billion. We have invested a large sum of capital to capture the growth opportunity arising from the accelerated rollouts by our customers. This is critical to our business growth, and a timely and swift response by Indus will generate long-term value to the shareholders. Our receivables increased by about INR 4.3 billion during this quarter, as our customers are seeking clarity on certain bills, and we expect to resolve it soon.I'm happy to report that the collections from one of our customers are now stabilizing at close to the invoiced amount after the shortfall that we witnessed in 2022. Regarding this customer's past dues, we are in constant dialogue with the customer for clearance of the same. We also continue to closely monitor any developments around the customers' fundraise plans.To sum up, we are pleased to have delivered a solid operational performance in Q1, coupled with the strides we are making in each of our strategic priorities. Steady collections have helped our financial performance, while the accelerated 5G rollouts and rural expansion by one of our customers would serve as significant levers for our growth.I would now request the moderator to open the floor for Q&A.
[Operator Instructions] The first question comes from Mr. Kunal Vora from BNP Paribas, Mumbai.
Congrats for a good quarter. I just wanted to get some [ hints ] on the growth CapEx of INR 20 billion. How much of that would be on macro towers, leaner towers, loading and any other initiatives? If you can help us understand this better? And how do you see this going forward? That's the first one.
I think our CapEx is typically distributed between towers, 5G rollouts, replacement and sustenance, and energy CapEx. These are the typical disruption of our CapEx. Now, Vinod, if you want to comment anything on the...
Yes, sure. Kunal, some high-level numbers for you on the breakup of the INR 2,200 crore of CapEx, around INR 1,400 crore of them is for the rollouts, the macro rollouts, and the rest are split across the other categories, which Prachur just mentioned.
Okay. And the cost per macro tower, how would that be now? You added 5,000 towers. So it used to cost about INR 25 lakhs. Where is it now? About INR 15 lakhs, INR 20 lakhs? If you can give us a number, which will help us project the numbers better?
Kunal, I think it stays in the same range.
Okay. And on the leaner towers, can you share like -- thanks for sharing the details which you have. If you can share the cost per tower margins compared to the macro towers? Any details which you can provide incrementally on the leaner towers?
Typically, Kunal, leaner towers are definitely lower on CapEx, right? And we have typically high double-digit margins on the leaner towers.
Okay. And CapEx will be significantly lower? It will be like, say -- compared to the close to INR 20 lakhs, which you have on macro, will it be like, say, INR 3 lakhs, INR 4 lakh, INR 5 lakh? Or will it be somewhere like...
See, for the sake of reasons, I would not be very specific, but it is significantly lower.
Okay. And just one last question, if I can, which is, how should we look at the average revenue per co-location going forward? It's down marginally year-on-year. Is it largely because of the rental renegotiation? And should we expect it to increase going forward, led by escalations, loading and contribution from leaner towers?
I believe that's probably impacted by the RER a little bit. Otherwise, I think revenue from co-location should remain in the ballpark where it is.
Sorry, I could not hear this clearly.
Yes. So, Kunal, what we were saying was the ARPT is impacted this quarter by the RER, the revenue equalization impact, which I talked of in my opening session. Other than that, it should be pretty same quarter-on-quarter.
But should we be building in some improvements because of annual 2.5% escalation? You're having 5G loading. Also leaner towers have their revenue increase but towers don't get counted. So should we be expecting an increase going forward or a flattish number?
So Kunal, I think it's -- from a forward-looking point of view, I think it has many, many factors like what kind of towers, what kind of mix we are talking about. So I think it won't be reasonable to assume one or the other, but the mix -- depending on the mix, I would expect -- because primarily, we'll be doing the single tenancy towers as of now. So I think the number should stay in the region, but it also depends on the mix that we deploy going forward.
The next question comes from Mr. Aditya Suresh from Macquarie, Mumbai.
I think he dropped out.
The next question comes from Mr. Sanjesh Jain from ICICI Securities, Mumbai.
A few from my side. First on the 5G, you did mention that we have grown from 7,000 rollout in the month of March to 12,000 rollout and we have reached 250,000 BTSs. Is that the right data point? I just wanted to confirm that.
No. I think, first of all, let me clarify, the 7,000 to 12,000 is the deployment by the operators, right? So I think, this is the total deployment by the operators, the industry rollout. And 275,000 is also an industry number as such. So it's not directly correlated to size because -- Tejinder, if you want to -- technically, what's the number or size...
Sanjesh, this is Tejinder. I think, first of all, as Prachur clarified, 7,000 to 12,000 -- The industry is fast tracking its deployment of 5G over the network. So, that is the pace the industry is doing overall. So between our various customers put together and the full portfolio of towers that they have, from all the [ toppers ] put together, that's the pace and the overall volume of 5G BTSs that they have installed. If one were to look at out of the [ 275,000 ] BTSs, what share would fall on Indus sites? I would say, roughly a little over 1/3 would be sitting on Indus sites from this overall base that we are talking about here.
From the market share perspective, for the 5G, will it be lower for us when you compare it to 4G? Because one of the operators has mentioned that they have rolled out 115,000 BTS, and that covers 65% scope of their immediate coverage. That means we are running closer to the first phase of completion of 5G rollout. How do you assess the market share for Indus Towers from the 5G?
So eventually, we have seen the 4G getting spread to almost 100% of the towers. It's a matter of time when 5G will go to 100%. So we don't see 5G getting selective, but yes, it may take 2 to 3 years when that full scope rollout of 5G would happen. One of the operators has 2 frequencies and therefore 2 BTSs per site that they need to put up. So obviously, if they are talking a higher number of BTSs, it does not mean they are covering higher number of towers because you can divide that by 2 and that's the number of sites that they are probably covering up. If you look at overall from an industry perspective, my estimation is roughly about 25% to 30% of the sites are yet covered by 5G, even a shade lower maybe. But that's where we are at an industry level as per my estimation.
And our market share will be reflected as the tower market share.
Yes, correct.
Fair enough. From the loading charges, can you help us understand putting a full-blown stand-alone 5G versus non-stand-alone 5G, what will be the differential in terms of the rentals which we charge to the operator?
So, Sanjesh, this is Vinod. The rental that we charge to the operator is a function of the equipment that they deploy, the power and the space and the weight. So stand-alone or non-stand-alone is the operator's technology preference. For us, it is a function of these three in terms of the loading revenue that we generate.
Fair enough. Just one last on the CapEx side. What is the payback period right now we are seeing for both macro, as well as the loading, that we are putting on the 5G side?
So Sanjesh, from a payback perspective, what we need to understand is, the operators come with us on a tenancy for a 10-year duration. And as you are already aware, most of the -- or a significant amount of the portfolio has already got renewed last year, which means we are seeing another 10 years on those tenancies, right? So, now if you're getting loading on them, that loading revenue is going to come with us for the next 9 years or 8 years, as the case may be. And it's payback-accretive from a very early stage itself from a loading perspective.
That's fair enough. But what will be the payback, assuming that it's an incremental cost over incremental revenue, right? And that's one. Number two, for the fresh macro tower, the single-tenancy towers we are putting, what's the payback period for that?
Sanjesh, just to clarify, I think typically for macro towers, we are at a high single-digit IRR on a single-tenancy basis without any loading. And for the leaner towers, it's probably high double digits. That's the IRR that we operate in. And as the loading comes in, the IRR further improves, or when the second tenancy comes, IRR improve. So that's the number that we are currently operating in.
Fair enough, sir. Any update on the dividend you want to share? We haven't announced any dividend in last fiscal year. What's the general thought process on the dividend payout now, considering that we are into an elevated CapEx mode as well for probably next 1 year to 1.5 years?
Yes, Sanjesh, so as you are aware, our dividend policy requires us to distribute 100% of the free cash to the shareholders. At this point in time, it is very difficult to -- for us to predict the free cash flow for the whole year, given the number of moving parts. As you rightly said, it's CapEx on the one side, but on the other side, it's also the visibility of collections from a major customer and the funding plan of that customer. So unless we sort of get a grip on those factors, which are extraneous to us, it's difficult for us to sort of think of dividends at this point in time. Once we get clarity on some of these, we'll be able to come back to the Board and then [ to you all ] in terms of our plans for dividends.
The next question comes from Mr. Aditya Suresh from Macquarie, Mumbai.
So I had a question on dividend, but maybe you just answer that. The second question I actually had was on the under-recovery in your energy reimbursement. So that was 3% in this quarter, 2% last quarter, 1% in the previous quarter. There seems to be an increase here. Any color you can provide here on this?
The major reason, as we mentioned at the outset, is really the seasonality between the transition between the winter period and the summer period. So, this is usually a high consumption -- high diesel consumption period. And plus, as Prachur already mentioned, we've had a couple of weather disturbances during the quarter, which had, as I would say, taken the energy costs up higher, and hence to that extent, some amount of non-recoverability is there. We are -- and Prachur has also talked upon this that we are taking multiple initiatives to reduce our diesel consumption as highlighted, which going forward, will help us reduce the losses.
And in terms of accounts receivables, there's been a mild increase here in this quarter. Any color on this and [ tieback ] to kind of your larger tenants?
Yes, Aditya. So yes, you are right. There's a minor increase of around INR 4 billion to INR 5 billion in the AR, accounts receivable, for this quarter. And it's -- the way we look at it is, it's a timing issue as some of our -- one of our customers is sort of looking at our bills and they're expecting it to get unwound in this quarter. In fact, as we speak, I can say a significant portion of that has already unwound itself, and we've got the cash in our bank.
[Operator Instructions] The next question comes from [ Mr. Jatin Mhatre ] from AMBIT Capital, Mumbai.
This is Vivekanand from AMBIT. So I had a question related to the energy margins. So just to understand better, Prachur, you said that this quarter, you saw 8% lower diesel consumption despite the higher 5G load. So in that light, if I look at the margins, the energy margins on a year-on-year basis, they are more adverse compared to last year. So what has changed on the energy side that in the last 4 quarters, the energy spread has widened? And I'm considering 1Q FY '23 as a comparison to adjust for seasonality.
So I think, Vivekanand, if I am not wrong, you're asking for the compared to Q1 of FY '23. I believe in Q1 of FY '23, there was a one-off that was impacting and given an impression. If I correct it, it was probably actually higher negative than what it is in Q1 of this year. I think it was close to 3.8% negative in last year. So actually, the energy costs are on the improving trend, given that we are reducing the diesel. Of course, we want the pace to be faster. All of us want the pace to be faster, but -- just to correct last year, because of the one-off in the [ PS ], but if you correct for it, it's minus 3.8% margin.Vinod, anything else?
No Prachur. That's it. Covered.
Right. That's very clear. Second question is on the CapEx outlook. So I understand that you have seen increased demand from one of your large customers, especially to roll out sites in rural markets. So is there -- based on the plan that the operator may have shared with you, how should one think about the CapEx for fiscal '24, considering that perhaps the rural rollout appears to be the single biggest factor for your CapEx to be so high?
I think the demand for new towers from the rural expansion and densification in urban areas still seems to be robust. I think we expect the demand momentum to remain healthy at least in this year and probably extending into the first 2 quarters of next year. But I think it remains based on rural expansion, densification in the urban areas and the 5G rollout that will primarily drive the CapEx for Indus.
Okay. So my last question is on the market share that we may now have of Airtel. So I think a couple of quarters ago, this was discussed quite a bit on -- with respect to Indus' market share. You mentioned in your opening comments that your market share has gone up. Could you help us understand where it was, say, a year ago and where it is now?
See, all I can talk about is the numbers that I have right now. As of now, we have rolled out close to [ 6,584 ] towers for all our customers combined. These include urban, rural and lean, right? So in my view, the market share has increased substantially, and I think we intend to keep it that way with our operational performance. So that's what I can comment on. But I believe [indiscernible] on the market.
The next question comes from [ Ms. Sonal from Prescient ] Capital India.
So I have a question with regard to your debt paydown and the debt levels. If you could give me a guidance around what is the plan for the company to [indiscernible] the debt, what is the comfortable level over the course of the next 1 to 3 years, that will be helpful.
This is Vinod here. So, as far as the debt is concerned, as you would have noticed, our net debt remains relatively flat for the last couple of quarters. It's -- around INR 5,000 crores ballpark is the number which we are comfortable at. Having said that, there is some headroom in case we need to sort of borrow more to help us capture these opportunities that are there in the market. But for now, we sort of look at this number as a sort of guiding light for us in terms of where we want to see our debt levels.
Got it, sir. So this is a range you want to operate in basically. Sir, I had a second question on the sharing factors that you see post the 5G rollout. This is again a 2 to 3-year kind of outside in perspective. If you could just give broadly like what are the numbers we're talking about, a boarder range, that will be helpful, if you could.
If I understand your question correctly, you're asking about the sharing factor in 5G. In my view, 5G and sharing factor are not correlated because I think if whoever is on the tower wants to rollout the 5G, I think it should not impact the sharing factor per se. It is a fact though that the newer towers that we are currently rolling out are single-tenancy towers. So, that can potentially impact -- our sharing ratio is impacted. From 1.78, we went to 1.75, primary driven by the rollout of the new towers, not so much the 5G.
Got it. So at a blended level, sir, if the sharing factor blended level will go down, will the unit level revenue go up, if I were to just talk about, let's say, on a per operator basis, if you could give that as a guidance?
I'm not sure that's the right reference. We won't be able to comment on that.
This is Vinod here. So the ARPT, what we measure is the average revenue per tenant. That's a number which we are reporting and that number is a function, as you rightly said, of some of the 5G revenue that we will get. But we don't -- I'm probably not even able to get the drift of your question in terms of what you're probably driving at. The ARPT will continue to go up as and when we get more 5G revenue, and that's a percentage -- it's a small percentage because currently, it is loading revenue. So that's how the ARPT will move.
So, you're saying, this will grow margin. I understand. I will take this offline.
[Operator Instructions] We do have a follow-up question from Mr. Sanjesh Jain from ICICI Securities, Mumbai.
Just one thing. I wanted to understand do we have any plan on the battery side? We are one of the largest consumers of the batteries. There's a growing demand for batteries, replacement batteries because of the adoption of EV. Do we plan to do anything around it to see that the asset can be better [indiscernible]? Is there any thought process there? And I know we have largely been using lead acid, but this will also help us in terms of transitioning to more better-quality batteries. Any though there?
Sanjesh, I think the battery is a very important topic. I think we have a full dedicated technology team working on that one. So I think currently, we are working on, as you said, lead-acid batteries. We are looking at lithium-ion and other new solutions, as I mentioned, the aluminum-air solution as well. So absolutely, I think battery is a very important component of our network. And we have actually laid out a very clear strategy on how we want to operate and make that as a part of a very important ecosystem for us in operating, especially as we reduce the diesel cost across our operations. So we are going into specifics. Yes, lead-acid, lithium-ion and any new technology on the battery side will remain forefront in our opportunities. And we are constantly looking at partners to participate where they can come and participate with us and work with us in this area.
But is this technology limited for the internal consumption? Or do you want to build a business model around it?
Sanjesh, we'll look at the opportunity. As of now, I can tell you that currently, it's more focused on the tower side. And as more opportunities come up, which is more feasible, we'll be happy to upgrade you.
You have another follow-up question from Mr. Kunal Vora from BNP Paribas, Mumbai.
So wanted to check on the receivables provision which you created, not a very large amount, but at the same time, why is it created? And is it a distributed payment? Or why is the [indiscernible] provision created [indiscernible]?
Yes, Kunal, this is Vinod. So there are 2 things we are probably asking at the same time. So we have certain provisions for disputes and there's general provision for doubtful debt that gets created. The provision for doubtful debt is a function of the number of days of overdue. So there's not really anything specific concerned with the disputes why we have sort of created this provision this quarter. And the figure this quarter is fairly miniscule in terms of the hit to the P&L.
And second is on the energy margin. Is it a timing issue last year, if I recollect right? You also had a large reversal of energy losses and you also reported some gains. So should we expect something similar going forward? Or this is permanent?
It was a one-off last time.
Last time was a one off. But last time, I think there was also a reversal of accumulated losses. I thought it was something that big. You had losses for many quarters, and finally, you managed to get some money from the customers, and there were some reversals. So is that something which we can expect on an ongoing basis? Or that was clearly a one-off, not something we should be extrapolating?
Yes. Kunal, that was clearly a one-off. There were certain settlements done with the customers. And as a result of that, we recognized the one-off last year. We don't see that continuing forever.
Okay. And finally, on the -- you had allowed some 9% exits annually to the customers without any penalty. Is it fair to assume that going forward, you will not have any meaningful exit penalty revenue? Because it's come off obviously to miniscule levels right now, so going forward, there should not be any exit penalty revenue?
Yes, that's right, Kunal.
The next question comes from Mr. Arun Prasath from Avendus Spark, Chennai.
Largely, I wanted to understand, given that we are now mostly rolling out in the rural side, what will be the difference in the tariffs between, say, in a tower in a rural site versus current -- our existing portfolio? Because this will obviously pull down the sharing revenue operator number, which is kind of not helping us in figuring out what is the impact of loading revenue?
Arun, I was not very clear on the question because loading revenue is irrespective of the location. It depends on what loading comes from that particular tower.
No, what I'm asking is, loading revenue should have already had some kind of impact on the sharing revenue per operator, right? It finally goes on impacting sharing revenues per operator. But we don't see that in the numbers. So I'm wondering, is there any -- because of the mix-related stuff, this is not impact -- this is not reflecting in the numbers?
No. So Arun, I can only say is, depending on the tower mix, depending on the kind of tower we deploy and which is not always that in general, there is a movement towards a certain kind of tower that we are deploying in rural and even in some point of the urban. So, that will drive our revenue. And in fact, I believe the loading revenue would happen on each -- depending on the timing when the 5G comes through, it will happen eventually on the rural as well. You may probably not be seeing it because of the RER impact last year. But otherwise, I think we are seeing -- from our point of view, if your correct for RER, we have seen the growth in the ARPT as well.Vinod?
That's right. And I think, Arun, we mentioned it at the outset that we had a correction taken from Q2 onwards in terms of the RER for one customer. So, that is the impact, from a downside, you will see on a year-on-year perspective in our ARPT.
Okay. So, most of the contracts are now re-priced. So last year, I think we did only around, I think, 1/3 [ the fund ]. The remaining 2/3 are also now re-priced is the reason why it's not reflective?
So it's not -- I mean it doesn't happen like over 1 year or 1.5 years. Significant part of the portfolio was up for renewal last year, which got done. And now, they're sort of spread over the next -- including FY '24, they're spread over the next couple of years, Arun.
Okay. So what percentage of the contracts are coming up for renewal this year and next year?
Ballpark, it's around 10%, Arun.
10% this year and 10% next year, is it right?
Ballpark.
Okay, understood. Okay. I'll reconcile the numbers offline.
Due to time constraints, I would like to hand over the call proceedings to Mr. Prachur Sah for the final remarks.
Thanks, everyone, for the questions. And overall, in summary, we are very pleased to have built upon our robust operational performance of Q4 and delivered significantly to our customers [ amidst ] network expansion in 2023. We continue to make progress on each of our key strategic priorities, which are critical to our growth, competitiveness and customer satisfaction over the long run. One of our major customers' rural expansion and swift rollout of 5G by operators are underpinning the positive momentum. We are excited to facilitate our customers in this next life of growth in a sustainable and inclusive manner. I once again thank you all for joining the call. Have a good day.
Ladies and gentlemen, this concludes the conference call. You may now disconnect your lines. Thank you for connecting to audio conference service from Airtel, and have a pleasant evening.