Indus Towers Ltd
NSE:INDUSTOWER
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Indus Towers Ltd
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Good afternoon, ladies and gentlemen. I'm Rajitha, the moderator for this conference. Welcome to Indus Towers Limited Fourth Quarter and Full year ended March 31, 2021 Earnings Call. [Operator Instructions] In case of a natural disaster, the conference call will be culminated post an announcement. Present with us on the call today is the senior leadership team of Indus Towers Limited.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. Bimal Dayal. Thank you, and over to you, Mr. Dayal.
Thank you. Thank you. Thank you all for joining us on the earnings call of Indus Towers for the full year ended 31st March, 2021, and very good afternoon to each one of you. Joining me on the call today are Mr. Vikas Poddar, our CFO; Mr. Vinod Rao, Business Controller; Kaustav Neogi, Finance Controller; and Surabhi Chandna, Investor Relations. As a start, I'm happy to announce that we have delivered a strong quarter 4 and a strong full year performance. On a full year basis, we have largest-ever net tower additions of 10,223. If you may recall that quarter 1 was muted due to lockdowns which signified massive ramp-up of deliveries during these next 3 quarters. I think it happened around the same time you would recall that we were struggling with the lockdowns previous year.On the churn side, the churn has nearly halved, which augurs well. We ended the year at 179,000 towers, 322,000 co-locations, which represent a healthy growth of 6% and 4%, respectively. On a quarterly basis, we delivered yet another all-time high net tower additions of 3,715 towers. Our net co-locations increased by 4,128, including churn of 856. This will be reflected in financial results, which will be shared with you all soon.Before I go into any other aspects, I wanted to touch upon the market first. And that too starting from the demand side. Well, on the demand side, the industry data volumes continue to grow, as you would know. And this growth is fairly rapid. We are witnessing once again a growth of almost 40% year-on-year, which is already on a very large base. This is driving and will continue to drive growth.With operators announcing race towards 5G makes the infra space even more relevant. We also saw spectrum auctions taking place, which saw participation from all 3 players, but it was somewhat asymmetric. All in all, we see the space in which we operate is becoming more and more relevant.On the strategic endeavors within the company, I'm very happy to report that the integration efforts are in full swing and most importantly, on target. I'm also happy to state that we've concluded our mission, vision and values exercise involving pretty much all the employees across the geographies. And it's my belief, and I think it is fairly well documented that this forms the culture of any organization. And as you would know, culture beats the strategy, no matter how good your strategy is. So this is an important piece of update which we touched this quarter involving all the employees as well.We have started the process of revalidation of our strategy. And in coming quarters, we will share the changes and augmentations, if any. Meanwhile, we are aligned to the strategy, which was shared with you earlier. I cannot sign off without touching upon the COVID situation.On the COVID situation, our brave heart field force continues to provide network connectivity basis which India today is fighting this pandemic as a fact that the call which I'm holding or a lot of you would be holding is actually being maintained by a lot of brave hearts who are actually looking at and making sure that network is alive 24/7, and this forms 1 of the most important tools of fighting this pandemic. Our endeavor is to keep everyone safe at all times. And we also are making sure that during these times when the uptime is of the highest priority, we are delivering our best operational uptime for our customers as well.I'll be very happy to take questions. With this, I would like to hand over to Vikas to take you through the financial results. Over to you, Vikas.
Thank you, Bimal, and a very good afternoon to all the participants on this call. So I'm pleased to share with you the results of the fourth quarter and the year ended 31st March, 2021, for the merged Indus Towers with the full consolidation of the erstwhile Indus Towers and Bharti Infratel. As stated in the last quarter, we continue to report our numbers on a pro forma basis, assuming that the merger was effective from the earlier periods. This is to ensure right comparatives for all the periods.I will start with the financial highlights from a full year perspective. Our revenues grew 0.4% year-on-year to INR 256.7 billion. Within that, our sharing revenue has shown a healthy growth of 3.9% year-on-year. Our EBITDA grew 4.2% year-on-year to INR 132.6 billion. Our profit before tax is up by about 4% year-on-year to INR 66.5 billion. Our profit after tax was down by 1% year-on-year at INR 49.8 billion, but this was mainly due to a onetime impact resulting from the change in tax rate last year. Adjusting for the same, our profit after tax would have been up by about 5% year-on-year.Operating free cash flow has increased by 0.8% year-on-year to INR 71.2 billion. Our return on capital employed and return on equity post-tax for the quarter were at 22.1% and 29.6%, respectively, same as last year.I will now come to the financials for the fourth quarter. In the fourth quarter, our revenues grew 2.9% year-on-year to INR 64.9 billion. In the same quarter, our EBITDA was up by 17.5% year-on-year, to INR 34.1 billion. Our profit before tax was up by 36.4% year-on-year to INR 18 billion and our profit after tax was up by 38.3% year-on-year to INR 13.6 billion. Our operating free cash flows increased by 1.9% year-on-year to INR 14.9 billion.So as you can see from the figures above, our financial performance has been strong in this year despite the operational challenges posed by the pandemic and the challenges facing the telecom sector. Furthermore, you would recall from the last quarter that we had higher exit revenue as a result of change in accounting practice of recognizing exit revenues on accrual basis due to certainty of receivables coming out of the security package the current run rate of exit revenue is between on INR 1.7 billion to INR 1.8 billion per quarter. Adjusted for this and other one-offs in the last quarter, which is quarter 3, our sequential performance, both in top line and bottom line remains very healthy.Our energy margins continue to be negative. However, there is an improvement over last quarter due to sustained efforts by the company in resolving differences with our customers.So with that, I would like to open the floor for question and answers, please. Thank you.
[Operator Instructions] The first question comes from Mr. Kunal Vora from BNP Paribas, Mumbai.
Congrats for a good quarter. Sir, first is, how do you see the recent spectrum auction impacting the prospects of new tower additions? Do you think that operators will be able to take care of the capacity requirements and there could be moderation in new orders? That's one.And second one also just, first, so of the 3.2 lakh co-locations which you have right now, how many will be coming up for renewal in FY '22 and '23? And have the discussions on renewal terms already started? Also with 1 of the operators facing funding issues, would you be open to negotiate lower rentals? And also earlier, you are expecting 2.5% rent escalation annually to start somewhere in FY '23. Is that still a fair assumption? That's it from my side.
So I'll take this one. This is Bimal here. Kunal, thank you very much for your questions. The first one is around spectrum auction. And impact of the spectrum acquired by our customers on the rollout. Now just a little background. I think the auction ended on March 2 and possibly, it's almost like INR 77,000 crores was garnered for 855 megahertz. Interestingly, all 3 operators participated. And as I mentioned, it was quite symmetric.Two of the spectrums, the lowest end, 702.5, both remained unsold. You see, I think we need to look at this quite historically while operators acquire new spectrum and will be deployed to alleviate requirements on capacity. We believe for a country like India, this is a very short-term phenomenon. I think data volume continued to grow constantly. And this actually drives and makes addition of additional sites and ongoing requirements.If you actually look at what is taking place across some of the cities, I think you will probably realize that a lot of spectrum will be deployed to alleviate the current pent-up demand as well. So I don't see much impact, which we can kind of talk of. While some of the capacity addressed would -- sorry, capacity sites could address -- get addressed with this auction.I think if you look at the transcripts of some of the announcements made by the operators, I think intent of operators is very clear to both group into interiors and have a deeper coverage as well. Now how do we see this in our breakup of sites, which we roll out? We see certainly a site pattern, which is 50-50. And I think this continues to be the same. So for 50% of our rollout, it is capacity, 50% of our rollout is for coverage. And there is a much bigger pent-up demand for sites at critical locations. As a matter of fact, we are not able to deliver in sites on critical locations as well.So I'm not too worried about any large-scale impact due to spectrum. However, this will generate a very good network-related activity as well, which is always a good exercise. This would also generate a high quality when it comes to our network. And generally, with higher-quality consumption pattern gets positively impacted as well. So I think this is answer to your first part, Kunal.The second one is around the renewal coming up as well. I think by end of this year, 1/3 of our possible portfolio will come up for renewal. And I think if you go back in time, we have -- if you go back, let's say, by 2016 or so when escalation freeze happened, we didn't possibly -- there were similar anxieties as well, there was a good give and take between the operators and us, and I think we settled for a good win-win situation for all. Hence, I'm not too worried about this as well, but this certainly remains a negotiation risk, which I would say we would cross when it comes as well. At this moment, there is nothing significant or nothing to report when it comes to engagement. All other things remain on track.
Just that the current situation seems a little different compared to last time you faced a similar situation because at least at that time, the tenants seemed to be financially better as compared to what they are right now, especially considering that like a large tenant right now is, I mean, they might depend on some concessions even for their viability.
Well, your -- I will certainly not deny what you are saying, Kunal, and you are absolutely right. The situation is stretched for our operators as well. If you once again go back in time, we managed to give certain concession which was escalation freeze. However, what we got was extension, which I think was a very good win-win situation for both operators and us as well. And as a result, I think we are sitting with these renewals which would take place in 2022, which could have happened way earlier as well. I'm certainly not denying that there won't be any negotiation, but we believe that we do hold cards, and it won't be anyway -- one way street here. So I hope that answers.
Sure, yes. And just on the 2.5% rent increase annually. Is it a fair assumption? Or right now, we still need to wait and see how the negotiations go?
Well, once again, I don't think we are going to back off on anything, but I'm -- this -- all this would form entire package as well. And we'll keep you posted as it progresses. At this moment, suffice to say that we do hold good cards. We have a very amicable, good relationship in which we can come up with a good win-win solution, which we've done this in the past. I think it's been the track record of this company. So let me assure you the moment this happens, we will certainly share.
The next question comes from Mr. Pranav Kshatriya from Edelweiss, Mumbai.
Yes. My first question is a little near term. You have seen tenancy cancellation rising in this quarter, and that was -- there was a secular decline in the previous quarters. But I just want to know why that has kind of come up?And secondly, how should we see that tenancy ratio sort of declining? Because increasing tenancy ratio is very crucial to maintain a solid written profile. But because the tower additions are pretty high, and because of which the tenancy ratio is sort of getting impacted. So how does company think about it considering the number of players also are not as much in the ecosystem as they were earlier. Hence, what are your thoughts on that?
Okay. Thank you, Kshatriya for your question. Let me answer on the exit part, exit needs to be looked at from a timing perspective. And I think I remember it last time. We did flag it that generally, there is a bump up of exits in March, which is when the financial year ends and operators do take this as a closure, hence, it comes up. So the quarter 4 is more like end of year kind of exit price. So I won't lose my heartbeat on it. I think important thing is the year-on-year exits, which certainly have halved, and we did mention earlier as well that we are seeing plateauing on the exit part as well.Now on the tenancy ratio, I think the way one needs to look at it is that we continue to build our portfolio with the fresh tower additions as well. In our industry, I think more towers you add, I think you build a portfolio for the second tenant to come in. And to that extent, you are right. At this moment, there is an asymmetric rollout, which is taking place amongst the operators and the question certainly goes into the fact that we will be seeing 3 operators fighting amongst each other or 3 plus 1, you can call it, or we would see 2 operators competing amongst each other.And I did flag it last time as well that look at it from a regulator's perspective, look at it from chronology as well, we do believe that somewhat penny is falling towards 3 robust sound operators competing with each other, which essentially means the third one, get a straight take off strip through these additional towers, which are being rolled out, and we believe that I think second tenant would be lucrative for the third operator to come in. I completely am aware that the struggle switch, let's say, VIL is facing currently as well. But once again, chronology tells us that where they are and where they were maybe around the last year, I think they have managed to do quite a lot of things. And from a tower company perspective, we certainly believe that it would be a 3-player market. So once again, wherever we sit, we have the industry's best tenancy ratio. We believe it would be 3-player market and obviously, we will be offering this portfolio to the third player. And that is when I think the tenancy ratio would start to bump up.
The next question comes from Mr. Sanjesh Jain from ICICI Securities, Mumbai.
A couple of them from my side. First, on the energy margin side, though we indicated in the opening remarks that we have seen disputes coming down and hence the losses coming down. And we mentioned in the previous call that we are engaging with the operator and negotiating to see if they can move to a fixed energy margin again. So where are we in terms of negotiation? And is the worst behind in terms of energy margins, should we assume that, henceforth, we will be making no losses or very minimal losses. Is that the right way to think on the energy margin? That's one.Number two, on the operating cost. We have seen quite a volatile in last 2 quarters, and I just wanted to understand what is the steady state full year operating cost, which is other expenses, repairs and maintenance, charity and donations all put together. I think this quarter charity and donations have been abnormally low. And what is the steady state OpEx added all the 3 together.And on the last one, can you update us on the dividend policy, how should we see dividend? This year, we have skipped the final dividend. Earlier, we had a policy of 60% to 80% dividend payoff policy. Can you just update how to see this dividend-paying out from this year onwards?
Thank you. Thank you, Sanjesh. I will take a shot at a couple of those and then hand it over to Vikas as well. Let me go in the order from -- so energy margin, I think your question was, is the worst over, so let me back off. Last quarter, we did mention that we are engaged with our operators. I did mention that I think there is a whole lot of alignment which we have on going towards fixed energy model. And I continue to maintain that. And obviously, I think this alignment is yielding some of the better understanding of where we sit and the pain points on both sides as well and I think when Vikas was alluding to a better quarter, I think this was the result of it as well.In as much, we wanted to announce the closure of FEM with 1 of our operators. I think the whole thing spilled away as well. And we remain very hopeful that if not months, we should be able to complete FEM soon. Now that would possibly put a very good alignment between us and operators. And I think this is where we are actually banking a lot, and we are very confident that we'll be able to close FEMs with all our customers. We are very close.Then next 1 is whether worst is over I would say from -- if you only look back, I think we have only bettered ourselves. What happens in the near future, we will be putting pretty much our best efforts on that account. And I'm really hopeful that we'll be able to deliver a better energy margin quarter or even come back and announce FEMs with our customers. I will keep the operating costs and the steady state question for Vikas and maybe Vikas you could possibly take that one.On the dividend, I just wanted to appear the air a little bit. If you look at as a company, we are in still the 6 months of a relatively large merger. And we continue to proceed with this integration exercise, and we remain quite comfortable with the payout since financial year '21, which incidentally, if you actually look at all-time highs, of which substantial portion was paid out in quarter 4, not only quarter 4, I think, almost 30 days back as well. We will certainly assess the dividends in due course. And in line with the policy, come back to you again. However, we remain where we are right now.With this, Vikas, would you like to add?
Yes, sure. Thanks, Bimal. On -- I'll probably just touch upon the dividend point first, in continuation with what Bimal said. So I think, first of all, the company has a very strong track record of paying dividends, right? So if you look at the history, we have a history of assessing this many times during the year.Specifically on FY '21, the Board has reviewed the dividend payouts, and it aggregates to -- if you really do the calculation, it aggregates to INR 20.12 per share. This includes the first interim that we did in quarter 1, which was INR 2.3 per share. And then the one, which we did as a special dividend of INR 17.82, just a couple of weeks back. And together, basically, this constitutes about INR 20.12.Now in terms of the payout ratio, you were talking about 60% to 80%. If you really look at this FY '21 payout, this would aggregate to roughly 110% of the cash flow. So we have done much better than what we have done historically. I mean, this is perhaps 1 of the highest rupee dividend we have ever paid out in our history. And just a couple of weeks back, we did that large payout. And as Bimal was saying, like we have done in the past, we will continue to sort of endeavor to return the excess cash to our shareholders. And our policy with regard to dividend remains the same. So we will continue to sort of pay dividend based on our free cash flow.Coming to your -- the second question, which is on the operating cost and the volatility. I think the way I would like to put it is I think there are basically, in our business, sometimes these volatility and fluctuation because of the nature of the business. So for example, if I look at the charities and donations, we already did some excess in the till quarter 3. And as a result, we did not really spend much in quarter 4. As per the statute, we were not required to spend more.And secondly, the nature of the business is such that we do see technical one-off provisions being created and then sometimes reversed in the next quarter. And this -- all this really creates a fluctuation quarter-on-quarter.To the extent all these are material, we certainly call out and we disclose these things in our calls and our reports. But otherwise, pretty much on a long-term basis, if you look at the year-on-year, things really look very stable. Things don't really show so much fluctuation. So I hope this answers your question, Sanjesh.
Yes. Thanks, Bimal, and thanks, Vikas, for the elaborated answers. A couple of follow-ups on that. Is the full year representative for the operating cost?
Well, again, I would basically say, even on a full year basis, sometimes, we do have these fluctuations because of the technical provisions. Again, given the nature of the industry and the nature of the business. So last year, we did have some extra provisions. Similarly, in quarter 3, if you recall, we did call out some provisions on account of policy alignments and so on.So to that extent, I think, year-on-year, probably, at an overall level, would be quite stable. But we will need to go deeper to really answer the specific question. So maybe we could take it off-line, Sanjesh, in case there's anything specific you're looking for.
Sure. Just 1 last question from my side, again, related to dividend policy and capital structure. Do we intend to maintain this debt for our financial leverage? Because we have always talked about improving our capital structure, and hence, positively impacting our return ratios. So to that extent, is it fair to assume that we will maintain these kind of debt levels on a balance sheet, and we will try to distribute maximum cash flow. Is that a fair assumption?
Well, I think it's a fair assumption. Basically, because if you look at our leverage ratio, it is at about 1.45, which is quite healthy and well within our debt covenants. So I think it's a fair assumption, given our profile that we are comfortable with our leverage. And going forward, we will be within our covenants. And the dividend payout as per the policy should be well maintained.
[Operator Instructions] The next question comes from Mr. Neerav Dalal from Maybank Securities, Mumbai.The next question comes from Mr. Chetan Shah from Abakkus AMC, Mumbai.
Just 1 basic and a technical question. The way the broadband penetration is happening and we see a lot of technology changes in the form of what different companies are talking about satellite-based data connectivity and all. I'm just trying to understand that at what level of number of tower we would be happy to -- and at what level we'll stop adding more number of towers, if you can give some sense on that would be very helpful.
Yes. I'll take this one. Thank you, Mr. Shah for asking this question. If I just link the 2 things which you've said on 1 side, broadband penetration, on the other side you also mentioned satellite companies making a headwind to broadband. Your question currently is would it impact the number of towers that would be needed in the future. Hence, assuming this is a question, I would kind of like answer this.
Correct.
Thank you. So look, I think I'll go a little bit historic and also into some kind of physics here as well. Now if you go back in time, I think time will tell us that Iridium, Thuraya, Globalstar, I think there were lots of companies who were actually trying to provide either the leo, neo or call it, the geo satellites as well. Now I think with physics really playing a role, you do need a lot of low-noise amplifiers on 1 side. And second, the technology catering to the time delays, which takes place with lower is with the leo and highest with the geostationary satellites as well.This physics itself makes it a little bit cumbersome, and I'm sure the technology is kind of overcoming all this as well as we go forward. But ubiquitous comparable -- commercially comparable alternate to broadband, which current technologies or terrestrial technologies are providing, I don't see that as a competition. On the contrary, this would be looked at as a complementary technology to what is being done as well. Hence, areas where it is very difficult to connect terrestrially will be used -- this technology would certainly be used as it was used in the past as well.So when we do, let's say, the threats to the industry, I don't see this as a threat earlier if you actually want to bring in a parallel, the Loon Project as well. I think we all are aware of what happened to Loon, I'm not saying that in the horizon, there will not be a technology coming in which could kind of disrupt. And as a company, we should always be mindful of where we are heading and what is on the horizon as well. But at this moment, I think commercially and otherwise, this remains one of the best, cheapest and more inclusive option of providing the broadband to the masses as well.
Yes. Thank you for such an elaborate answer. The whole context to understand and reasons behind that is to get a sense that eventually, at what level we can pick out as a, one, as a tower and second, the utilization of tower in terms of tenancy ratio. So that gives me a good flavor of the business metrics. Thank you, sir. Thanks a lot.
The next question comes from Mr. Vishnu from JM Financial, Mumbai.
Could you please throw some light on what are the 5G-related activities that have been going on in the market and if you could throw some light on the company's strategy to participate in the 5G way, especially on the small cell and the non tower side of the business?
I'm sorry, I missed your question, Vishnu. If you can be a little slow and repeat your question, apologies.
Sure, sir. So I was just asking like, I mean, the operators have announced their intention to roll out 5G in the near term. So what are the kind of activities if you could broadly throw some light on the kind of activity that is happening in the market? And if you could throw some light on Indus Towers' strategy to participate in this 5G, especially on the non-tower side of the business, that is small cell and the other aspects that would be really helpful.
Okay. Thank you, Vishnu. I think your question, if I understand it right, is what kind of activities which are taking place in the 5G domain amongst the operators as well and how is Indus Towers participating or collaborating in those? And I think your color is around or your qualification is around, let's say, small cells, et cetera. So firstly, if you go back in time, I think it would be very interesting to see what kind of announcements that have been made. And if you look at the transcripts of what was announced last quarter between the operators, it certainly makes everybody believe that it is 5G race, which is on.Let's say, from a Jio perspective, you've probably seen the announcement of indigenous and a collaborative approach towards rollout of 5G, I think Airtel went ahead, and I think there were some interesting questions around bragging rights of 5G, which Airtel certainly hogged by demonstrating a live demo in Hyderabad.Now these are very symbolic moves which have been made, which cannot be rolled back in any form, which essentially means the race is on. From here on, I think next steps that could take place is spectrum auction, garnering of money for the 5G race, it would be interesting to see that who all participate because not participating might not be sustainable for any operator whatsoever as well.Is it needed? Is it something which will be good for the industry and for the end users? I think no doubt about it. If you go deeper into the technology, I am a firm believer that this is a technology which is way different. It is constructed way differently as well. And provide it's on not only capacity and speeds, but also latency, which gives rise to a lot of interesting use cases. And obviously, the contribution, in my opinion, of 5G to the GDP is going to be very, very high as well.Now I think I'll just extrapolate this question on what kind of activities which are taking place for preparation of 5G. I think one interesting thing I would like to point out is recent acquisition of iBus acquiring 100% stake in Ubico networks to provide neutral IBS in that space. And if you actually read the announcements there, this is more like providing neutral IBS in that for -- in preparation of 5G as well. And since 5G will be rolled out in higher bands, I think this is one thing which will be important and interesting besides the backhaul.For us, I think there is only 1 way, and we have learned this, we have done it, we have proven it as well, for any new technology, which comes in to work very closely with the customers, very confidentially with the customers as well, see what kind of strategies they are adopting because as you would know, infrastructure comes ahead of technology. And I think even if the whole thing will be rolled out initially on the existing sites, I think we will certainly be standing ahead of our customers and making a shorter of the time to market as well. I don't think I can get into any further specifics here besides the fact that whatever we are doing currently in 4G domain is an advanced preparation for 5G as well. But I certainly believe we need to watch this space closely.
Next question comes from Mr. Neerav Dalal from Maybank Securities, Mumbai.
I was actually on mute last time. I have 3 questions. First is on the depreciation, we saw depreciation lower on a Q-on-Q basis this quarter. What would be the steady state going ahead? That is number one.Number two is that telcos have acquired spectrum in the last auction. Any benefits for us when the spectrum is deployed, that is number two.And number three is, there was this announcement sometime back that the telecom department is allowing sharing of tower backhaul infrastructure and Wi-Fi equipment. Anything for us in this?
Thanks, Neerav, for these questions. I would need the first question to be answered by Vikas. I'll take the second and third post his answer. Over to you, Vikas.
Yes, sure. So Neerav, I think as far as the depreciation is concerned, there was a policy change that happened in the current year post-merger as a result of which we have year-on-year impact. Does that answer your question, Neerav?
So going ahead in terms of steady state, how should one look at depreciation?
I think the current quarter is after the policy change. So pretty much, I would say it's a steady state.
Thank you.
Thank you. Thank you, Vikas. I'll go to the second question in a way, actually, I have answered this question, but I think your question is around any benefit around this? I think, firstly, there will be a large-scale network transformation activity, which would take place. And I think whenever a network transformation activity takes place, it's always beneficial. Can I quantize the benefits? No. I think the benefit certainly would be the quality of networks would certainly go up. No, I hope you all understand what operators or our customers are going through. And the complexity of all migrating traffic as well.Now if you remember, last year around this time, we were -- we came to a grinding halt when it comes to our economic activity. We certainly got into lockdown. What does lockdown mean? I'll just take Gurgaon example from -- or maybe Mumbai example, a lot of you guys are from Mumbai. BKC traffic came crashing down because people stopped traveling to BKC. However, the traffic generation, let's say, on the high-rise in condos clearly went up. Now managing that kind of a spike really generates a network transformation and operators started to run in that direction. And all of us were in that trying to manage that traffic and traffic growth as well.Then came quarter 2, quarter 3 when started -- things started to ease off as well. And now suddenly, we are also seeing some kind semblance of lockdowns as well. So it's not as though you can port capacities from 1 place to the other overnight as well.Hence, when spectrum -- additional spectrum comes in, such pent-up demand is clearly addressed, quality of these networks become very good. You'll be able to do things from the dark spots as well, you will get capacities on time. And hence, you would end up consuming more which only starts the spiral of more requirement of more number of sites as well. Can I quantize the benefits? No, I don't think I can quantize the benefits here as well. But it generally augurs well when the network activity goes up as well for companies like ours.The third question you had was around DoT coming up with sharing of infra. All this, as I said, is a good thing. We, as IP-1 registration providers, have certainly been looking at those things, including -- I think there has been a lot of noise, a lot of action around [ PM1e ] as well. But I must remind you that we are still looking at our strategy of keeping an eye on those things as well. And I think as a company, as we evaluate this, we would certainly come back to you with what is it that we would like to go, which direction. And we would be certainly sharing this with you. With the current development, I think the options become a lot more loud and clear to us.
The next question comes from Mr. Vivek Ramakrishnan from DSP Mutual Fund, Mumbai.
You had talked about debt covenants. I just wanted to know what the debt covenants are in terms of the total net debt-to-EBITDA that you can go to. And you said you're comfortable at these levels. And if the covenants are at a higher level, what would push you to go to a higher level?
Vikas, you may like to take this one?
Yes, I'll take this. So I think the debt covenants. So first of all, thank you, Vivek, for the question. So debt covenants currently are at about 1.45 against our limit of 3.5. So as you can see, we are at a very comfortable level. Well, technically, 1 could say we can go up to 3.5 because that's our limit. And what would take us to higher debt levels is, of course, basically when we start thinking about investing in other growth areas, which could possibly take us up. But currently, that's really not very clear in terms of the numbers. So we are quite comfortable. And basically, going forward, we will see if we need more debt.
We do have a follow-up question from Mr. Kunal Vora from BNP Paribas, Mumbai.
So a couple of questions, sir. Are you seeing any inflationary pressure on cost of constructing towers because certain commodities, like steel, have seen a spike? And also, have there been any major design changes and such that cost of constructing a tower site, like I mean, over the last 4 or 5 years, have you seen any changes in the structure so that you can actually lower the cost of constructing towers?
Thank you. Thank you, Kunal. I think it's a very pertinent question. Yes, I think these inflationary pressures keep on coming, I think we saw steel becoming cheaper and now the whole thing is going way different as well. However, in our scheme of things, we do have a reasonable amount of negotiating powers with our partners as well, which I think keeps this entire thing within check and control as well and doesn't kind of show up.I think the interesting question is, which actually has a bearing on your first question, do we make design changes, do we -- and how things have changed over a period as well as to answer your question, yes, and you would be witnessing in your cities as well the kind of towers which used to come up, let's say, 10 years back to the towers, which actually came up 5 years back to the towers, which are coming in now as well. And I think the current set of towers are certainly a different product, different genre as well when it comes to their load bearing capacity as well, and even the way they are built. So I think from a foundation perspective, to the tower perspective, to the steel used, to the designs, I think everything has gone through a change and it continues to evolve.And now, let's say, with higher spectrum being rolled out requirement and greater percolation of fiber and connected towers specifically in cities, requirement of large towers is certainly coming down. And we are getting into very different kind of towers and the cost per tower obviously is impacted in a good way.For, let's say, rural, I think we also have evolved the design as well. And I think those towers, if we compare what we used to make, are way more efficient than what used to be rolled out, let's say, 10 years back. So this is an evolving thing. And now we have lots of solutions and products for our customers as well for their rollout. And I think this is something which we are very proud of with our scale, with our experience, I think all this plays very well in our favor. Hope this answers your...
Yes. Yes, that's very helpful. Just 1 last question, if I may. Can you talk about any new initiatives which you're pursuing. Some time back, there were like news reports that Indus is considering hosting EV charging stations and creating that kind of infrastructure. Also, you talked about fiber in the past. Anything which you can highlight? Also on the EV part, anything which you've done and any feedback that you can provide?
So once again, Kunal, I think I personally remain extremely passionate about all what you just mentioned. And in fact, I shared what I had to last time on EV. Some of you who follow the EV sector, I think you could possibly have a [ roof ] of excitement on that because that also happens to be a location business.Unfortunately, I would like to take you to the strategy and the closure of the strategy and would kind of come back and reveal what we intend doing in various spaces. And what we intend possibly playing in or not playing into as well.One thing I can say that, yes, initial pilots were done. And I think it's quite possible to have, let's say, marginal cost upgrade for our charging equipment to provide charging for EV vehicles. However, it depends on the size, depends on the solution as well. So don't take my wide brush statement here. However, it remains a very, very good possibility.
At this moment, there are no further questions from participants. I will now hand over the call proceedings to Mr. Bimal Dayal for the final remarks.
Yes. Thank you. Thank you very much. I think this was a great session. However, before I give my closing remarks, I just have an announcement to make. Surabhi Chandna, who's our Investor Relations head, she's the one who's been holding this portfolio for more than 5 years, seen ups and downs along with this company, has been answering all your queries 24/7, has been a rock-solid pillar here, has decided to move on. And in as much we wanted to continue to have her with us, she is going for some purple pastures as well.With this, I certainly wanted to tell Surabhi how great a job she's done so far, how she's, along with others, build this company as well. So I just wanted to wish all the very best, inform all of you as well about this change and Mr. Kaustav Neogi will be standing in until we come back to you with who would be taking over this portfolio.Before I give my closing remarks, I'll hand it over to Surabhi to certainly say a few words on her journey. And be a little nostalgic about her association as well. Over to you, Surabhi.
Thank you, Bimal. Thanks for your very, very kind words. Honestly, it's been a real pleasure to be part of this organization in both of ours, for the last 5 years, first as Bharti Infratel, and now as a larger organization as Indus Towers. So it's been a really fulfilling personal and professional journey for me.Since we have the larger group, I can just take this opportunity, I would also want to thank the analyst and the investor community who have been giving their insights and engaging with us and feedback over the last 5 years to me. It has obviously helped me personally and professionally, we've always been able to try to take it up to management in terms of feedback. So I think I would really appreciate that they continue to extend the same support to the management and Indus Investor Relations going forward. And personally, I can say I hope to stay connected and wishing everybody the best. Thank you.
Thank you very much, Surabhi. I'm sure you'll do well no matter where you are. God bless you. Now for my closing remarks, and generally, I sort of give some points or pointers as well.Just a reiteration here, we did manage to deliver a strong quarter and a full year, which is the previous year. Demand side actually looks strong with heavy data growth, which really augurs well. New spectrum, as I -- as we discussed and touched upon as well, will be deployed and create network activity, which takes place, which in my opinion, is generally very good.Next quarter remains an interesting, important quarter, not only from the foundational quarter for next financial year. I think from merger-related activities as well, it's a very important quarter in which we wanted to finish off all important and deeper integration stuff, including the platforms.The 5th bullet I wanted to touch upon was, please, we've discussed a lot of business and a lot of parameters here but when it comes to safety versus business, I think certainly, the safety takes priority. So I certainly wanted each one of you to please keep yourself safe and your family members as well because this is an unprecedented situation of wave 2 of this pandemic. We are experiencing all this across all our geographies and territories as well and clearly dabbling between difficult choice as they say between life and business, obviously, life certainly takes priority.With this, let me wish each one of you being safe and your families, too, as well. God bless. Thank you very much.
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.