GTL Infrastructure Share – Is GTL Infrastructure a Good Buy?

GTL Infrastructure Share – Is GTL Infrastructure a Good Buy? Telecom infrastructure is the backbone of the telecom industry. It includes physical components like cell towers and fibre optic cables, as well as virtual elements such as software-defined networks (SDNs) and network functions virtualization (NFV). Together, these technologies provide seamless communication, high-speed internet, and reliable connectivity.

According to Mordor Intelligence, the Indian telecom market was valued at USD 44.43 billion in 2023. It is projected to reach USD 48.61 billion in 2024 and $76.16 billion by 2029, growing at a compound annual growth rate of 9.40%. India ranks among the highest in daily data consumption, with users spending about six hours on smartphones.

However, the telecom sector has faced significant consolidation due to mergers and acquisitions. The exit of 14 telecom customers has left over 14,000 towers unoccupied, which is more than 50% of GTL Infrastructure’s total tower portfolio. In this highly competitive environment, where rivals have greater financial resources and skilled teams, can a loss-making company like GTL Infrastructure Share turn its fortunes around? Let’s dive into our analysis to see if GTL Infrastructure share is a good buy in today’s market.

Also read: Godha Cabcon Share: Is Godha Cabcon A Good Buy?

About the company- GTL Infrastructure Share

Business Overview

GTL Infrastructure Limited (GTL Infra) is registered with the Department of Telecommunications in India as an IP-1 company. It provides passive infrastructure to telecom operators, allowing them to host their active network components. GTL Infra has been a pioneer in this industry. It was the first independent tower company in India to be listed on the stock exchanges. Key Highlights of the Company for the Financial Year Ended March 31, 2024:

–Total Revenue from Operations: ₹1,372.01 crores, compared to ₹1,457.86 crores in the previous financial year.

–Normalized EBITDA: ₹198.26 crores, down from ₹213.16 crores in the previous financial year.

–Finance costs for FY 23-24 were ₹805.1 crores, up from ₹781.9 crores in FY 22-23.

Also read: Yes Bank Fundamental Analysis: Is It a Good Buy in 2024?

Business Model

The company’s business model focuses on shared passive infrastructure. GTL Infra owns, operates, and maintains telecom sites that can accommodate the active components of multiple telecom companies. This approach helps telecom operators shift their spending from capital expenditures to operational expenditures. As a result, they can allocate more capital to their core operations.

Revenue Model

Service Offered: Providing telecom towers on a shared basis to multiple telecom operators.

Core Activities:
-Building telecom infrastructure
-Owning and operating telecom towers
-Maintaining passive telecom infrastructure sites

% of Turnover of the entity: 100%

Industry Analysis

The Indian telecom sector underwent a major transformation in 2023-24. This change featured important advancements and strategic efforts to boost the digital economy. Key trends include the rollout of 5G technology, increased focus on cybersecurity, and the development of sustainable telecom networks.

A report from Mordor Intelligence estimates the Indian telecom market was worth USD 44.43 billion in 2023. It is expected to grow to USD 48.61 billion in 2024 and reach USD 76.16 billion by 2029. This represents a compound annual growth rate of 9.40%.

India is quickly becoming a global leader in 5G technology. This progress highlights the country’s commitment to embracing cutting-edge technology. It also paves the way for new opportunities in sectors like healthcare, education, industry, and entertainment.

You may like: IRB Infrastructure Shares: Key Insights for Market Enthusiasts

Shareholding Pattern

Shareholders	June 2023	Sept 2023	Dec 2023	March 2024	June 2024
Promoters	3.28%	3.28%	3.28%	3.28%	3.28%
Share Pledging	100%	100%	100%	100%	100%
FIIs	0.13%	0.12%	0.10%	0.12%	0.17%
DIIs	45.47%	45.17%	44.42%	43.25%	42.18%
Public	51.13%	51.42%	52.19%	53.35%	54.37%

As of the June 2024 quarter, the promoters have maintained their pledge at 100% of their holdings, which raises concerns about their confidence in the company’s future. This situation indicates that the founders may lack faith in the company’s prospects, as they have not reduced their pledged shares. The promoters’ holding is notably low, suggesting they are not fully invested in the company’s success. This can signal a potential lack of confidence to investors, impacting the overall perception of the stock’s health.

Foreign Institutional Investors (FIIs) have slightly increased their holdings from 0.12% to 0.17%, which is a modest gain of 0.05%. While this increase indicates some growing interest from FIIs, their overall participation remains low. In contrast, domestic institutional investors hold 42.18% of the company, but mutual funds have not invested at all, maintaining a 0.00% holding in the June 2024 quarter. This lack of investment from mutual funds could suggest a cautious or negative outlook on the stock from a broader institutional perspective.

In summary, the combination of unchanged promoter pledges, low FIIs participation, stagnant mutual fund investments, and declining institutional holdings points to potential red flags regarding the stock’s long-term viability and investor confidence.

Also explore: Reliance Power Fundamental Analysis: Growth Potential and Risks

Current Fundamentals of the company- GTL Infrastructure Share

The current Fundamentals of GTL Infrastructure shares are poor due to the decline in the performance:

-Current Price: ₹2.25
-Market Cap: ₹2,894.39 Crores

Return Ratios– (Benchmark >15%)
-Return on Equity (ROE): 0.00%
-The Return on Capital Employed (ROCE): -3.06%

Growth Indicators (Benchmark: Positive & Consistently rising)
-Net Profit Margin (NPM): -49.66%
-Earnings per Share (EPS): -0.61

Leverage Ratios
-Debt-to-Equity Ratio (D/E): -0.63 (Benchmark: between 0-1)
-Interest Coverage Ratio: 0.52 (Benchmark: above 1.5)

Valuation Ratios– (Benchmark: Positive and less than industry average)
-Price-to-Earnings (P/E) Ratio: -3.69
-Price-to-Book (P/B) Ratio: -2.04

Revenue and Net Profit Overview

Revenue
-Annual Revenue: ₹1,423.25 Crores | Decline: 4.18% in the last year
-CAGR (3 Years): -0.6%
-CAGR (5 Years): -1.2%

Net Profit
-Annual Net Profit: ₹681.36 Cr| Increase: 62.5% in the last year yet is negative at -681 crores.
-TTM: [Net Loss]
-CAGR (3 and 5 Years): -780.9 Crores

Also read: Suzlon Energy Fundamental Analysis: Ride the Rollercoaster of the Renewable Stock Market

The Downfall of GTL Infrastructure Shares: What Went Wrong in the Telecom Sector?

Market Consolidation:
The telecom sector is consolidating. In May 2023, Ascend Telecom acquired Tower Vision India. Brookfield also bought ATC’s Indian operations for $2.5 billion. This trend is creating larger, integrated telecom infrastructure firms. (Source: Annual Reports 2023-24)

Challenges Faced:
The exit of 14 telecom customers left over 14,000 towers abandoned, making up more than 50% of the total tower portfolio. These towers incur costs without generating revenue. The company is currently litigating to recover unpaid dues from these operators.

Impact of Abandoned Towers:
The abandonment has led to financial strain, as landlords blocked access to sites and dismantled towers. During FY 2023-24, 903 sites were dismantled due to disputes with landowners.

Tenancy Status:
As of March 31, 2024, the number of tenants was 22,018, down from 22,247 the previous year. The average tenancy per occupied tower remains stable at 2.1.

Future Outlook:
Despite recent challenges, the company aims to stabilize operations by cutting costs and extending tenancies. They are optimistic about growth opportunities from 5G rollouts and new 4G services.

Financial Claims:
The company continues to pursue claims of approximately ₹153,074 million from operators for premature exits. However, many of these operators are insolvent or have ceased operations.

Debt Management:
Reducing debt to a sustainable level is a top priority. The company faces uncertainty due to lender actions and needs clarity on debt restructuring. Revenue from operations declined from ₹14,579 million in FY 2022-23 to ₹13,720 million in FY 2023-24. This drop is primarily due to tenant exits and adjustments in energy management contracts. (Source: Annual Reports 2023-24)

Need for Debt Restructuring

The Company’s debt has become unsustainable due to shutdowns and consolidation in the telecom sector over the past 6-7 years. Urgent restructuring is needed to align with sustainable levels, following the Reserve Bank of India’s guidelines and a TEV study.

As of June 30, 2024, the outstanding principal amount of the secured rupee term loan is ₹2,881.19 crores after adjustments. One lender has filed a petition for Corporate Insolvency Resolution Process (CIRP) with the NCLT, which was dismissed on November 18, 2022, and is currently under appeal.

Despite these challenges, the Company continues normal operations and does not anticipate significant impacts on its financial or operational activities. Finance costs for FY 23-24 were ₹805.1 crores, up from ₹781.9 crores in FY 22-23.

Policy Support

Budget Allocation: The Department of Telecommunications received ₹111,876.67 crores in the interim Union Budget 2024-25.

FDI Inflow: The telecom sector attracted USD 39.99 billion in FDI from April 2000 to March 2024.

R&D Funding: The Centre for Development of Telematics received ₹5,500 million from the central government for fiscal 2024, up from ₹500 million in fiscal 2023. This increase is expected to drive innovation and technological advancements in the telecommunications industry. (Source : Indiabudget.gov.in & Statista, June2024)

Summing Up GTL Infrastructure Share

From an investor’s perspective, GTL Infrastructure is facing significant challenges. The telecom infrastructure sector has suffered due to various developments, including the Supreme Court’s cancellation of 122 2G licenses in 2012, ongoing tax issues, and the accumulation of unsustainable debt among telecom companies. The closure of major operators, such as Aircel and Tata Teleservices, has further compounded these issues, turning many of the company’s telecom sites into single-tenant locations.

With mounting debt, declining annual revenues, and negative profits, concerns about the company’s turnaround persist. Promoter confidence appears low, with holdings reduced to just 3% and 100% of shares pledged.

Currently, there are no positive indicators for the company. Investing solely based on its low share price could be risky, potentially leading to significant losses. While recent policy changes and government initiatives may eventually benefit the sector, it’s prudent to wait and assess the company’s performance over the next few quarters. At this moment, GTL Infrastructure does not present a compelling investment opportunity.

That’s all for today’s post. Hope you get some valuable insights from here.

Happy reading!

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over some time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.