Holding Indus Towers? Jefferies downgrade flags 14% downside risk—here’s why

Indus Towers Share Price: Brokerage firm Jefferies has turned cautious on Indus Towers Ltd, downgrading the stock to “underperform” from “buy” and cutting its price target by 30 per cent in its latest note on Tuesday, April 14.

The new target price stands at Rs 375, down from Rs 530 earlier. This implies a downside of about 14 per cent from current levels, according to the brokerage.

Renewal cycle risk flagged

Jefferies said the downgrade is driven mainly by concerns around site renewals coming up in the telecom tower space over the next two years.

A large number of towers installed in the second half of 2016 and the first half of 2017 are due for renewal in the second half of 2026 and first half of 2027. The brokerage warned that this could lead to tougher negotiations for Indus Towers.

It said a slowdown in new tower additions across the industry could increase competition during renewals, forcing the company to either offer higher discounts or risk losing tenants to rivals.

Rising capex adds pressure

The second concern highlighted by Jefferies is elevated capital expenditure.

Despite a 30 per cent decline in tower additions during the first nine months of FY26, Indus Towers’ capex has risen 38 per cent year-on-year. After adjusting for input tax credit reversal, it is still up around 20 per cent.

The brokerage said the rise is being driven mainly by a 94 per cent year-on-year jump in maintenance capex, which now accounts for roughly 25 per cent of total capex. It added that this trend is unlikely to ease given the ageing asset base.

Jefferies has raised its capex estimates for FY27 and FY28 by 18 per cent, and expects annual capex to stay elevated in the Rs 7,200 crore to Rs 8,000 crore range over FY26–FY29.

Earnings estimates cut

Factoring in higher costs and renewal risks, Jefferies has cut its revenue and profit after tax (PAT) estimates by 2 per cent to 6 per cent.

It now sees only about 3 per cent earnings per share growth, along with a 4 per cent dividend yield.

The brokerage also said higher risks to growth will limit any valuation re-rating for the stock.

“We cut our target multiple to 6.5x enterprise value to EBITDA and downgrade the stock,” Jefferies said.

Stock slips, stays flat for the year

Indus Towers ended 0.4 per cent lower on Monday at Rs 436. The stock has been largely flat so far this year as investors weigh steady telecom demand against rising costs and renewal-related uncertainty.

The latest downgrade adds pressure on sentiment as the market reassesses earnings visibility and long-term cash flow trends in the sector.