The government's recent decision on Vodafone Idea's adjusted gross revenue (AGR) liabilities has emerged as a significant positive catalyst for Indus Towers , dramatically improving cash-flow visibility and raising prospects for dividend resumption after a prolonged 12-quarter pause. The AGR relief is expected to enhance Vodafone Idea's ability to make regular vendor payments and increase network capital expenditure, directly benefiting Indus Towers as a major service provider.

Indus Towers last distributed dividends in May 2022, with an interim payout of ₹11.00 per share. Since then, the company has delayed dividend distributions for 12 consecutive quarters spanning FY23, FY24, FY25, and the ongoing FY26 period due to prolonged uncertainty surrounding Vodafone Idea's payment obligations and financial stability.

AGR Relief Structure and Impact

The Department of Telecommunications has communicated that Vodafone Idea's AGR liabilities will be frozen at ₹87,695 crore as of December 31, 2025. The relief package includes structured payment terms designed to ease the financial burden on the telecom operator.

According to IIFL Capital, the net present value of the AGR burden effectively decreases by 60-80% depending on the discount rate, with no compounding going forward. This substantial relief improves Vodafone Idea's fund-raising prospects and creates room for equity infusion and potential conversion of part of its ₹1,20,000 crore spectrum debt into government equity.

Dividend Resumption Prospects

Axis Capital analysts view the AGR relief as a strong positive for Indus Towers, significantly increasing visibility on Vodafone Idea's ability to make regular vendor payments and incur network capital expenditure. The improved payment visibility directly strengthens Indus Towers' cash-flow outlook and raises the probability of dividend payouts resuming.

Historically, Indus Towers has maintained a policy of returning excess free cash flow to shareholders, with payout ratios exceeding 100% in earlier years. Analysts project dividend payout ratios of 45-70% of free cash flow over FY26-28E, implying a dividend yield of approximately 3-7%.

Q3 Financial Projections

ICICI Securities has provided detailed projections for Indus Towers' Q3 performance, expecting continued operational improvements driven by 5G expansion activities.

The rental per tenant increase is expected to be driven by higher loading revenue from 5G expansion by Bharti Airtel and Vodafone Idea. However, EBITDA is projected to decline due to a high base effect.

Management Guidance and Future Outlook

Indus Towers' management has previously indicated that clarity on Vodafone Idea's AGR liabilities would be crucial for making informed decisions on shareholder returns. In October, Managing Director and CEO Prachur Sah stated that the board remained committed to considering cash distribution to shareholders by the end of the current fiscal year.

With Vodafone Idea's higher capital expenditure capacity, analysts expect tenancy to begin recovering from FY27E onwards, with estimated tenancy reaching approximately 1.75x by FY31E. The combination of improved payment visibility from Vodafone Idea and anticipated tenancy uptick significantly increases the likelihood of dividend reinstatement.

IIFL Capital estimates potential payouts of ₹4,400 crore, ₹15,600 crore, and ₹25,700 crore in FY27, FY28, and FY29 respectively, noting that fresh equity infusion and spectrum-debt conversion could materially reduce Vodafone Idea's future payment burden.

Indus towers has received a Buy rating from CITI, with the brokerage firm setting a target price of ₹515 per share. This recommendation reflects CITI's positive outlook on the telecom infrastructure company's stock performance.

Brokerage Recommendation Details

The following table summarizes CITI's recommendation for Indus Towers:

Market Implications

CITI's Buy rating indicates the brokerage's confidence in Indus Towers' business fundamentals and growth prospects. The target price of ₹515 suggests potential upside for investors, based on CITI's analysis of the company's financial position and market opportunities.

The recommendation comes as part of CITI's ongoing coverage of the telecommunications infrastructure sector, where Indus Towers operates as a significant player providing tower and infrastructure services to telecom operators.