Suyog Telematics Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Tenancy engine running hot, revenue yet to catch up: 30,000+ tenancies added in Q3 with 1,000+ towers, but billing delays mean the full revenue lift only materializes from Q4 and FY26.
• BSNL strategy pivot is a tailwind: BSNL is shifting from own-CapEx sites to IP sites from Suyog and Indus, a faster, commercially viable model that management expects will double order flow.
• Fundraising withdrawal creates a spillover, not a cut: The planned preferential issue was pulled due to market conditions, pushing ~1,500 tenancies of rollout into FY26, but the 15,000 tenancy exit target stands.
• Margins normalizing as growth capex resumes: EBITDA margin dipped to ~70% as new tower installations restart; management sees ~65% EBITDA and 32-35% PAT as the steady-state level going forward.
• What to watch next quarter: Whether the debt funding closes on time to prevent further spillover, the pace of billing conversion from the 455 unbilled sites, and any concrete timeline on the zinc battery trials.

Rollout & Tenancy Growth

• Q3 was the inflection quarter: After a slow H1 by design, full-fledged rollout began in Q3 with 1,000+ towers and 30,000+ tenancies added, meeting internal targets. The pace is expected to continue or even accelerate.
• Revenue lag is structural, not a miss: Sites added mid-quarter earn only ~1.5 months of revenue, and operator sign-off takes 30-45 days before billing starts. MTNL equipment struggles caused a further 30-45 day delay, while Vodafone billing via RFID tooling added minor friction. Full revenue impact flows from Q4 onward, with the full-year effect in FY26.
• 455 sites await billing conversion: Sites bid in late November/December are still in the sign-off pipeline; operators need 15-20 days to install equipment post sign-off, so billing will be on a pro-rata basis in the coming quarter.
• Slum sectors are the competitive moat: 70-80% of Q3 rollout sites came from slum sectors where the company claims strength even against its largest competitors.

Tushar Shah: "My 70%, 80% sites which we are rolling out in Q3 have come from slum sectors where we are very strong even compared to our biggest competitors."

• Rollout composition tilts macro: 70-80% of Q3 sites were macro towers, 20-30% small cells. BSNL's 4G rollout is 100% macro, while Vodafone is deploying small cells primarily in cities like Mumbai. Macro towers carry higher revenue per site.
• Q4 spillover is a funding story, not a demand story: Q4 rollout gets impacted because the planned preferential issue was withdrawn based on market conditions. The target itself remains intact and will be covered in FY26 once alternative funds are arranged.

BSNL: The Strategy Shift That Matters

• BSNL is moving from builder to buyer: Rather than deploying its own CapEx sites, BSNL is now eyeing more IP sites from Suyog and Indus, which are commercially viable and faster to deploy. The site rollout numbers remain the same, and funding is intact.
• Cabinet approval adds fuel: BSNL received an additional ₹6,000 crore approval from the cabinet and is expected to be very aggressive in coming quarters, opening new circles like Odisha and West Bengal.
• Order flow expected to double: Management expects 100% more orders to flow through from BSNL, targeting at least 2,000-2,500 BSNL tenancies in Suyog's portfolio by FY26 exit, which would take BSNL to 15% of revenue.
• BSNL's 4G rollout is mostly upgrades: Of BSNL's 65,000 4G towers, the majority are upgrades from existing 2G/3G sites; only ~10,000 are new towers, of which Suyog has already done 500+.

Tushar Shah: "Rather than putting their own sites, which is a CapEx, they are eyeing for more and more IP sites. So there's only change in strategy."

Margins & Profitability

• Q3 EBITDA dip is a one-off mix: EBITDA margin fell to 69.9% from ~73% in Q2 (excluding ECN provision reversal). The decline was driven by a ₹1.5 Cr bonus payout and the absence of Vodafone debt recoveries that had boosted prior quarters (₹4 Cr in Q2 FY25, ₹3.5 Cr in Q3 FY24).
• Steady-state margins are lower than recent peaks: The extraordinary margin levels of the past two years reflected a period when loading was coming onto existing towers with no new tower additions. As new tower installations resume, margins will revert to regular levels: EBITDA around 65%, PAT at 30-32%.
• Vodafone Idea debt is normalizing: Outstanding beyond 180 days has come down, and provisions previously created have been successfully recovered and reversed in the P&L. Payments are now received within 180 days, so no new provisioning is needed.
• Tax rate benefits from depreciation: The low effective tax rate (11-18%) reflects deferred tax benefits arising from depreciation on new sites, driven by the difference between income tax and company law treatment on the increased site count.

Funding & Balance Sheet

• Preferential issue withdrawn, debt bridge activated: The planned equity raise was pulled due to adverse market conditions. Management will proceed with debt for the time being, speaking with HDFC and Axis Bank, and expects to close the fund requirement within the next month or so.
• ₹800 Cr CapEx plan is fully committed: To reach 15,000 tenancies from the FY24 base, the company needs ~8,000 towers at a total CapEx of ~₹800 Cr. Of this, 1,000 towers are already added, leaving 6,500-7,000 more to deploy by FY26 exit.
• Debt ceiling is ₹250 Cr: Management is comfortable taking debt up to ₹250 Cr, with the debt/equity ratio maintained. The remaining ₹550 Cr is expected from equity raises plus internal accruals. The current debt ratio stands at 1.29x.
• Promoters are backstopping the plan: Promoters are planning to infuse funds and are described as "101% sure" about executing the ₹800 Cr CapEx. The ₹250 Cr equity raise will be done without promoter participation, with both preferential and QIP routes under discussion.

Ajay Sharma: "The CapEx of ₹800 Cr which I have to do, I will do it no doubt. There is no doubt the company. We are 101% sure, and our promoters are confident, the business is in our hands, and we are 101% going to do this work."

• Acquisition completed, not distracting from organic growth: The Delhi-based IP-1 asset (Lotus) has been acquired, with ₹5 Cr advance paid and ₹8.5 Cr balance due by end-Feb. Management emphasized that the first priority is putting available funds into organic growth, and other acquisition targets may be delayed by a few quarters.

Vodafone Idea & Other Operators

• Vodafone small cell readiness underway: Vodafone and BSNL have started readiness for small cell rollout in coming quarters or the next financial year. Vodafone is currently adding 600-700 towers on an hourly basis.
• Debt recovery is no longer a drag: Vodafone Idea recoveries that had boosted prior quarters are now normalized, with payments coming within 180 days and no new provisions required. The absence of recovery income in Q3 explains part of the margin decline versus both Q2 FY25 and Q3 FY24.
• Jio and Airtel expected post-March: Management indicated that two other operators are expected to come after March, though no specific timeline or commitment was provided.

New Initiatives & Adjacencies

• FTTH is annuity-based and growing slowly: The fibre-to-the-home business involves vertical wiring of buildings with recurring rent from Jio, Airtel, and BSNL. Revenue depends on home passes, not per-kilometre metrics. A major jump in FTTH rollout is expected post-FY27.
• Zinc battery trials on track, savings unknown: Trials are expected in Q4, but management declined to estimate cost savings, calling it premature until successful trials are completed.
• Wind turbine idea shelved: The concept was evaluated and found unworkable because of energy cost generation dynamics.
• DC energy meter installation is planned for the next quarter onward.
• ESOP procedure has been secured for staff.

Guidance & Commitments

Key Metrics