18th December 2024

PESB Research

BSE: 537259

Suyog Telematics
India: Telecom Infrastructure
BUY | CMP: 1933 | Target: 2180 (13%) Price performance
250

About 200

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Suyog Telematics Limited is a company in the 100

telecommunications industry that builds and 50

maintains telecom tower infrastructure. They -

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focus on improving network connectivity in
cities and villages, helping to bring better
Suyog Nifty
internet and mobile coverage to more areas.
Their services include setting up small cell
towers, installing fiber networks, and offering
Particulars FY24 FY25E FY26E FY27E
eco-friendly solutions. By working with major
telecom companies, Suyog Telematics is Revenue 167 217 350 574
helping to prepare cities for 5G technology and Revenue Growth 16% 30% 62% 64%
bringing modern network services to rural EBITDA 117 150 243 399
areas as well. EBITDA % 70% 69% 69% 69%
Net profit 63 64 89 213
Net profit % 38% 30% 25% 37%

Services Offered:
Metrics
 Tower Erection Last Traded Price ₹ 1,795
 Fiber Optics Network Solution 52 Week High ₹ 1,945
 Pole Erection 52 Week Low ₹ 836
Face Value ₹ 10
Market Capitalisation ₹ 1,923 Cr.
Product Portfolio: PE 26.7
ROCE 21.60%
 Ground Based Tower ROE 23.80%
 Roof Top Tower PEG ratio 1.53
 Cow Tower
 GBM Tower
 Camouflage Tower
Suyog’s revenue comes from four main deployment based on customer
sources: requirements.
 The acquisition team secures land leases
1. IP (Infrastructure Provider) Fees: The from the owners, ensuring a foundation for
main revenue stream, IP fees, are monthly long-term operational sustainability.
fees paid by telecom operators for using
Suyog’s towers. The amount varies by 2. Deployment at Site
tower type (ground-based, rooftop, etc.) and
is predefined in the contracts, which helps  After securing the location, the company
Suyog estimate revenue in advance. deploys tower infrastructure, which
2. Site Rental Reimbursement: Suyog rents serves as a critical step for enhancing
land or rooftop space from property owners their asset portfolio.
to place its towers, and these rental costs
are reimbursed by the telecom operators. 3. Infrastructure Sharing
This part of the revenue is passed directly
through to cover site costs, so it doesn’t add  The company leases the erected tower
to Suyog’s profit but covers their expenses. infrastructure to wireless tenants via
3. Loading Charges: When operators add Master Service Agreements (MSA).
new equipment (like antennas for 4G or  These agreements are typically long-
5G), they pay additional “loading charges” term and outline predefined pricing
to Suyog. This fee is charged for the extra structures.
equipment weight and power needs on  Tenants are responsible for installing
existing towers, creating an extra income and managing active equipment like
stream. antennas and base transceiver stations
4. Utility Reimbursements: Suyog also (BTS).
provides power (electricity or diesel backup)
to its towers. These utility costs are 4. Sustainable Revenue Model
reimbursed by the telecom operators,
covering their operational expenses but not  Co-location agreements are secured
directly impacting profit. with tenants for durations exceeding
seven years, often backed by exit
In summary, Suyog Telematics builds and penalties.
leases out telecom infrastructure, generating
 This strategy establishes a stable,
steady revenue from leasing fees, rental
recurring revenue stream, ensuring
reimbursements, and extra charges for
financial predictability.
upgrades
5. Margin Accretive Operations
Business model
 Adding new tenants to existing sites
The company employs a structured approach incurs minimal incremental costs
to develop and monetize tower infrastructure, compared to the initial setup.
ensuring scalability and profitability. The key  This results in higher profitability
steps in the business model are as follows: margins, contributing to wealth creation
for stakeholders.
1. Identification of Site

 The company meticulously identifies

optimal locations for infrastructure
Products & services

1. Tower Erection Service

 STL builds strong and reliable rooftop towers for mobile networks. These towers are eco-
friendly, can handle high winds up to 180 km/h, and work well even in tough conditions.

2. Fiber Optic Network Solution

 STL provides fiber optic solutions for the telecom industry. They focus on setting up fiber
cables, towers, and pole sites in an eco-friendly way. Fiber cables are better than old methods
because they reduce signal loss, carry more data, and reach longer distances. STL uses safe
and scalable methods to install these cables, ensuring reliable network expansion and
smooth connectivity with quick monitoring and response systems.

3. Pole Erection Services

 STL installs telecom equipment on poles and flyovers to improve network coverage. By
working with local authorities, they place equipment in crowded areas and install CCTV
cameras for public safety. This method makes better use of existing infrastructure instead of
building new towers, saving time and cost while improving performance.
Clientele

Source: Suyog Telematics Ltd.

Client Concentration – Revenue split

As of July 2024

Client concentration(%)
0.3%
23.3%

49.6%

26.8%

Airtel Jio VI BSNL

Source: Suyog Telematics Ltd.

Current capacity

Suyog Telematics Limited

Macro site towers - 1326 tenancies

Micro site towers - 3818 tenancies

Fiber - 5010 kms Fiber networks

Fiber to the Home -FTTH

Industry Overview India’s position as a key player in the
global telecom landscape.
India’s telecom industry is firmly positioned as
a global leader, ranking as the second-largest Indian Telecom Infrastructure Industry
telecom market in the world. With a remarkable
subscriber base and accelerating technological The passive infrastructure industry, which
advancements, the industry is primed for includes telecom towers and fiber networks,
exponential growth. has grown rapidly due to several factors:

1. Subscriber Base and Growth Trends  A huge increase in mobile and internet
usage.
 As of June 2024, India’s telecom  Widespread adoption of 4G and the rollout
subscriber base has reached 1.096 of 5G networks.
billion, encompassing both wireless and  Growing demand for better network
wireline connections. performance and higher data capacity.
 The industry is witnessing rapid growth,
driven by a surge in broadband and Government Initiatives Driving Growth
internet subscriptions, reflecting the
increasing digital adoption among users. The Department of Telecommunications (DoT)
has set clear goals to boost telecom
2. Demand for Infrastructure Expansion infrastructure:

 To accommodate the rising demand for  Expanding broadband connectivity and

data and enable seamless 5G coverage, rolling out more fiber optic networks.
a substantial expansion of tower  Aiming to achieve 70% fiberization of
infrastructure is imperative. telecom towers by December 2024 to
 Tower companies and telecom support the growing need for faster and
equipment manufacturers are investing more reliable internet.
heavily to upgrade existing
infrastructure and deploy new towers to Understanding Tele-Density
ensure robust connectivity.
 Tele-density measures how many
3. Fiber Optic Network Expansion telephone connections there are per 100
people in a region. It reflects how developed
 The rollout of an extensive fiber optic and connected an area is in terms of
network is crucial to manage the telecommunications.
anticipated surge in data traffic.  India’s overall tele-density is 85.95%, with
urban areas leading at 133.46%, while rural
 This network is foundational to
areas, though improving, still lag at 59.65%.
supporting next-generation technologies
Tele-density in developed regions ranges
and improving the efficiency of data
from 120-150%
transmission.

4. 5G and Future Prospects

 As India transitions toward a 5G-

dominated ecosystem, the telecom
industry is poised for innovation and
sustained growth.
 Investments in advanced technologies
and infrastructure will further bolster
Opportunity for Suyog Telematics H1 FY 25 Earnings update

Revenue Expansion

 Revenue is expected to be driven by site

India need 1.2 additions and tenancy growth.
million towers for
seamless
telecom network  For FY 25, revenue projections at Rs. 197
crores. For FY26, management projects
revenues to exceed ₹320 crore.

 Projected tenancy growth involves

expanding from the current 5,100 tenancies
to nearly 10,000 by the end of FY25,
effectively doubling site count.
Out of this 1.2 million,
0.6 million are already
fiberized with 5G
cababilities Capex:

 The projected Capex for FY25 is

approximately ₹450–₹475 crore, with a
similar range planned for FY26.
Out of the remaining
 Average capital expenditure per tower is
0.6 million, 0.3 million
towers will be built by estimated to be ₹10 lakh, with macro towers
Indus Tower. Suyog costing around ₹12-₹15 lakh each and
still has a significant small cells around ₹4-₹6 lakh each
opportunity of 0.3
million towers and is
targeting to deploy
10,000 towers in the
next 2 years. Financials:

 EBITDA margin is expected to be

maintained at around 60–65%.

 BSNL and Vodafone are expected to

drive revenue growth with substantial
site installations and long-term
contracts (10-15 years).

 Capex payback period is targeted at 3 years

for single tenancy and 18–24 months for
higher tenancy.

Focus on inorganic growth

 The company is in talks to acquire some

companies having Airtel and Jio
 tenancies. The management asserted  The government has allocated ₹89,532
that the acquisition talks are in their final crore for BSNL and MTNL, marking a
stages and they plan to complete a few 28% increase from last year’s revised
acquisitions by the fourth quarter. budget.

 Suyog Telematics Limited is  This funding will be used for technology

strategically acquiring only those upgrades, organizational restructuring,
companies having Jio and Airtel and a voluntary retirement scheme.
tenancies.
 Budget Allocation for Telecom

 The total budget for the telecom sector
Fiber To The Home (FTTH) is ₹1,28,876.67 crore, including ₹17,000
crore from the Universal Service
 Suyog Telematics plans to add 15,000 kms Obligation Fund (USOF).
of Fiber cables in the next 3-4 years to
strengthen its position in the FTTH market  The USOF funds will support projects
of India. like BharatNet, compensation to telecom
service providers, and research and
 FTTH will contribute 20% of the total development initiatives.
revenue for Suyog Telematics by 2027.
 Customs Duty Changes

 Customs duty on printed circuit board

Investment thesis assemblies (PCBA) for specified
telecom equipment has been increased
from 10% to 15% to encourage local
1. Capex and Capacity expansion:
manufacturing.
Suyog Telematics is planning to invest ₹800
 FDI and Overseas Investment
crores in capital expenditure (Capex) over the
Simplification
next two years to strengthen its position in the
rapidly growing telecom infrastructure sector.
 The government plans to simplify rules
With this investment, the company aims to
for Foreign Direct Investment (FDI) and
expand its capacity to 15,000 tenancies by
Overseas Direct Investment (ODI),
2027, reflecting its aggressive growth strategy.
aiming to promote the use of the Indian
This move positions Suyog Telematics as a key
rupee for global investments.
player in supporting the increasing demand for
telecom infrastructure, driven by
 India’s 5G Rollout Vision
advancements in 4G, 5G, and the rising need
for better network connectivity. This expansion
 India is working to become a global
highlights the company’s commitment to
scaling its operations and capitalizing on the leader in 5G technology, with plans to
opportunities in the booming telecom market. position itself as a hub for 5G innovation.

 Significant investments are being made

in research and development to create
indigenous 5G technologies and
2. Government support and Industry applications, driving innovation and self-
Tailwinds: reliance in the sector.
 Capital Infusion in BSNL
3. Growth in revenue, profit and tenancy By combining these approaches, the company
ratio: aims to strengthen its competitive position in
the market, enhance its tenancy portfolio, and
 Capital expenditure by Suyog telematics scale its operations to capitalize on the rapidly
is expected to increase its total growing telecom infrastructure sector.
Tenancies to 15,000 by FY 27.
Government initiatives and other Peer Comparison
industry tailwinds is expected to
increase their Tenancy ratio to which will Peer Comparison
further increase their revenue and Suyog
profitability. Metrics Indus Tower
Telematics
Revenue (in Crs.) 167 28,601
EBITDA (in Crs.) 117 16,046
4. Organic as well as inorganic growth: EBITDA Margin(%) 70% 56%
Net Profit(in Crs.) 63 6,036
 Suyog Telematics Limited is pursuing a Net Profit Margin(%) 38% 21.10%
dual growth strategy by focusing on both Revenue per Tenancy
organic and inorganic expansion: ₹ 35,000 ₹41,200
per month
Number of Towers 4,360 2,29,658
1. Organic Growth:
(As of March 2024)
o The company is actively working
on increasing its current
infrastructure capacity to meet Indus Tower is a leader in the Telecom
the rising demand for telecom infrastructure industry. It holds around 32-35%
services. market share in the Telecom infrastructure
2. Inorganic Growth: industry.
o Suyog Telematics is exploring
opportunities to acquire other
telecom infrastructure
companies, especially those with
existing tenancies from major
operators like Jio and Airtel.

5. Monopoly in Telecom Tower Deployment

in Slum Sites
 STL has established itself as a leader in
deploying telecom towers in slum areas,
a critical segment characterized by
dense populations and congested
spaces. This strategic positioning
highlights the company's expertise in
catering to high-demand areas while
maintaining cost efficiency.
Looks Better with charts

Revenue
700 64% 70%
62%
600 60%

500 50%

400 40%
30%
300 30%
17%
200 20%

100 10%

0 0%
Mar-24A Mar-25E Mar-26E Mar-27E

Revenue Revenue growth

Source: Company, PESB Estimates

EBITDA
450 64% 70%
62%
400 60%
350
50%
300
250 40%
26% 28%
200 30%
150
20%
100
50 10%

- 0%
Mar-24A Mar-25E Mar-26E Mar-27E

EBITDA EBITDA growth

Source: Company, PESB Estimates

The effects of Capex will be seen on the Top line and Bottom line from FY 26. We expect revenue and
EBITDA to grow exponentially from FY 26. EBITDA margins to remain around 65-70%
 Suyog Telematics - Tenancies & Towers
18,000 16,410
15,000
16,000
14,000
12,000 10,000
10,000 10,940
10,000
8,000
5,144 8,860
6,000
4,000
4,360
2,000
-
Mar-24A Mar-25E Mar-26E Mar-27E

No. of Towers No. of Tenancies

Source: Company, PESB Estimates

Suyog Telematics Limted to triple their number of tenancies in the next 2 years. The revenue
per Tenancy for Suyog Telematics Limited is around ₹ 4,00,000 per annum.

Valuations and view

India’s telecom infrastructure industry is poised to experience rapid growth in the coming years. With
the opportunity of around 3,00,000 towers, the Total Addressable Market for Suyog Telematics Limited
is quiet large. The management is focused on rapidly increasing the number of towers and also looking
for inorganic growth through acquisitions.
It is currently trading at a P/E of 26 and PEG ratio of 1.53. With its capex plans, we believe Suyog
Telematics to increase its topline and bottomline at a CAGR of 50% and 49% respectively for the next
3 years. With rapid expansion in its capacity, we believe the higher P/E multiple is justified and
we believe Suyog Telematics to be a good bet for Long term. We have valued Suyog Telematics
Limited using the Forward P/E multiple approach. According to our analysis, the fair value for
Suyog Telematics Limited is ₹ 2,180 with a forward P/E of 18.
Financial Statements
Income Statement (in INR Crores)
Particulars FY23 FY24 FY25E FY26E FY27E
Revenue 144 167 217 350 574
Revenue Growth 14.0% 16.0% 30.0% 61.6% 64.1%
Raw material cost 20 17 23 37 60
Power & Fuel 0 0 0 0 1
Other manufacturing expenses 1 1 1 2 3
Employee cost 14 17 23 37 60
Selling & Administration expenses 8 9 12 19 32
Other expenses 8 5 8 12 20
EBITDA 93 117 150 243 399
EBITDA % 64.6% 70.4% 69.4% 69.4% 69.4%
Depreciation & Amortization 26 34 56 82 90
Other income 13 8 10 16 26
EBIT 79 91 104 176 335
EBIT growth % -1.6% 15.5% 13.7% 69.7% 89.9%
EBIT % 55.1% 54.8% 47.9% 50.3% 58.2%
Interest 16 20 18 58 51
EBT 63 72 86 118 284
Tax 13 8 21 30 71
Net profit 46 63 64 89 213
Net profit % 32.2% 38.0% 29.7% 25.3% 37.0%
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