Diesel genset makers set to lose top client Indus Towers

If you are an investor in generator manufacturers, now is a good time to rethink your strategy.

Indus Towers, India’s largest consumer of diesel generators and its largest telecom tower firm, is looking at replacing the thousands of diesel generators it runs with sparkling new solar panels.

The company, jointly owned by mobile operators Bharti Airtel, Vodafone Essar and Idea Cellular, buys nearly 35% of all diesel generators made in India.

“The initial programme will cover 2,500 towers,” said BS Shantaraju, CEO of Indus Towers.

Indus, formed three years ago, hosts 48% of all cell-phone antennas in the country. It also accounts for more than a third of the three lakh telecom towers in India.

In all, it consumes three million units of electricity a year, enough to power more than one million Indian homes and is the single-largest power consuming company in each of the 16 states where it has operations.

While most of the 1.1 lakh towers owned by Indus are powered by the grid, operators have to depend on diesel generators in rural and far-flung areas, such as mountains and jungles. There are around 20,000-30,000 diesel-fuelled telecom towers in the country, according to industry estimates.

Shantaraju says Indus has had mixed luck with trying alternate fuels. Among those that it has tried are hydrogen-powered fuel cells and liquefied petroleum gas, or LPG. “We are working on an alternative to seeking the commercial LPG from the market. Otherwise, we will end up buying all the LPG in the country,” the CEO said.

Solar may be the answer, especially in a sunny country like India. Under the pilot programme, the company has decided to go for an ‘outsourced’ model of solar power production. It has entered into agreements with six companies which will bear the initial cost of putting up the solar installations and maintaining them.

In return, Indus will pay a fixed amount every month.

“Solar is about 20-25% cheaper than diesel,” says a company official, while not revealing the exact numbers. Unlike diesel generators, you do not need to employ a security guard or a minder to regularly monitor and re-fuel the generator. Indus indirectly employs around 50,000 people in the country — one for every two towers.

Shantaraju said the firm broke even nearly a year ago and has managed to double its revenues in two years to $2 billion. It is expected to add around 5,000 towers a year for the next few years.

The CEO dismissed the suggestion that an initial public offering was nigh.

Bharti and Vodafone each have 42% stake in the firm, with Idea holding the remaining 16%. It had more than 2.02 installations on its 1.1 lakh towers as of December-end, giving it a 48% market share in mobile-antenna hosting in India. In comparison, Anil Ambani’s Reliance Infratel is estimated to have around 40,000 towers and around 60,000-70,000 tenants.