This reimbursement is likely electric expenses incurred at the sites which are owned by the promoters. Suyog bills exact cost of electricity expenses to the telecom operator, recognizes it as a separate line item and passes it on to the tower owner.
Revenue from operations has a separate line item called reimbursement income, which is ~32 cr.
Reimbursement to Shivshakar Lature is a very large amount (28 cr.) and there are no line items in the P&L statement that big (except for cost of goods sold).
Thanks for the detailed reply, sir! Much appreciated.
Wrt reimbursement to Mr. Shivshankar Lathure, it jumped (as you know) from ~3Cr to ~30Cr. I too was unable to find a line item in PL which showed this big jump vs last year.
If the impact of money they have paid him is reflecting is hidden in the BS, they are misleading by using the term ‘reimbursement’ .
(Disc: Not invested, started reading the latest AR as this company came up in one of the screens I ran)
Are there any new developments in Suyog? Big volumes on certain days before results when a major chunk of equity changed hands. Was this rally only in anticipation of a good result or were there any other developments in the company regarding 5g deployment, new orders etc that are not in the public space yet?
Suyog Telematics (STL) has approved to issue warrant on 12th Aug 2023 at price of Rs. 570 (vs CMP of Rs. 1,176)
Post the warrants promoter’s stake will increasing by ~10% from ~47% to ~57%.
What is the purpose of issuing warrants?
STL plans to triple its tower asset base by adding 10,000 small cell towers to the current base of ~4,300 towers over the next two years. Yes, its 10,000 and not a typo ie., 2.3x from the current capacity.
Total money required for the capex is Rs. ~600 Cr. (Rs. ~6 lakh per tower).
This Capex will be divided in two years.
In FY25, the company plan to invest Rs. ~250-300 Cr.
Source of money
The company is expecting Rs. 150-170 Cr through internal accruals in FY24 and FY25. Further, Rs. 60 Cr is infusion by the promoters through warrants.
The additional Capex may be through borrowings or further warrants issuance.
Observation
The allotment of warrants to promoters reflects their confidence in the company’s future prospects and commitment to its growth strategy.
While there is no clear guidance for the second-year capex plan. It is expected that the successful completion of the first year’s Capex will yield adequate cash flow for expansion in the second year.
Source - Bastion research
5G Infrastructure Development: Suyog Telematics is heavily investing in high-power small cell infrastructure to make urban cities 5G-ready. This infrastructure is critical for enabling faster and more reliable wireless communication.
Rural Connectivity: The company plans to extend 5G connectivity to rural areas through RLS sites, ensuring comprehensive coverage and improving network capabilities in less urbanized regions.
Fiber Optic Expansion: Enhancing its fiber optic network is a priority to support the accelerated deployment of 5G. Suyog aims to fiberize mobile towers to enhance network speed and reliability.
FTTH (Fiber to the Home): Suyog Telematics is rolling out revolutionary FTTH solutions to empower homes with unprecedented 5G speeds, further expanding its service offerings and customer base.
Operational Efficiency and Cost-Effectiveness: The company emphasizes sustainable practices, cost-effectiveness, and efficiency in its operations, which are integral to its long-term growth strategy. It focuses on minimizing turnaround times and maximizing profitability by leveraging low Capex requirements and efficient infrastructure sharing models.
Government and Strategic Partnerships: The company has secured strategic partnerships and government site agreements, providing stability and growth opportunities. These sites are located in prime and critical locations, offering high demand and minimal risk of termination.
Innovation and Sustainability: Suyog is committed to providing environmentally friendly solutions and maintaining a forward-looking vision that incorporates efficiency and sustainable practices.
Through these strategic initiatives, Suyog Telematics aims to maintain its leadership in the telecom infrastructure sector, adapt to evolving market demands, and capitalize on the opportunities presented by the rollout of 5G technology across India
How can issuing warrants at a 52% discount be a positive to existing shareholders. If you need money, do a rights issue or preferential placement at max. 25% discount. Looks like a major red flag.
A lot of things look good here from my readings except for a few major concerns:
Company wants to do a capex of 800-850 Cr in the next 2 years. Even after warrants and debt (assuming 250 Cr debt cap as mentioned by promoter), company needs ~400-450 Cr for which they will need to do an equity dilution
Assuming CMP, that means 0.3 Cr additional shares worth of equity dilution. Another concern is that they might again decide to take a large discount
An additional 0.1 Cr equity dilution is pending in next 1 year through warrants
Looking at the median PE over last 10 years for Suyog and Indus, all the upside due to growth is currently baked into the CMP
No margin of safety
No visibility on future roll-outs for growth visibility - BSNL is now rolling out 4G, who knows how long they’ll wait for 5G. VI situation might improve further but their projects would lead to high working capital days and might impact ROCE
Their margins are relatively high and might reduce if they keep expanding but that seems to be far into the future, their sales are still <1% of Indus
All their numbers are phenomenal but they operate in an oligopolistic market which limits growth via either pricing power or new customer acquisition
But there could be further growth down the line with respect to PAN India 5G rollout, 6G, etc. There could be a potential good upside if they keep executing well.
For now, I am thinking of waiting till company announces how they plan to generate additional funds for capex in q3, q4
Plans of the company are quite bright with Suyog Telematics having committed to a major expansion of passive tower infrastructure over the next two years. It plans to deploy over 10,000 passive towers and lay 5000 km of optical fibre network cables. The other strategic goals include plans to deploy over 3000 macro towers in the next two financial years with support from BSNL and Vodafone idea. These towers are essential for enhancing network reach and service quality across various regions. More plans include installing over 500 towers specifically in the MTNL Mumbai Circle to boost connectivity and network reliability in this high demand metropolitan area. It further aims to roll out over 1000 small cell towers in FY2025 but due to the scale of this initiative, the company expects some deployments to extend further into the financial year 2026.
Starlink in india is at a very frenzy stage. I feel central govt. is strongly against it, and i feel there’s still a huge timeline for starlink to even enter in India. Not to forget Ambani will try his best to not let jio die.
