ICRA, a ratings firm, has upgraded the Indian telecom industry outlook. The rating has gone up from negative to stable. This is because the telecom companies are now paying their dues in a timely manner. The most major difference would have come from Vodafone Idea (Vi). The telco was able to increase tariffs, boost revenues, and also raise funds in 2024. This helped Vi in reducing cash stress on the business and boosted cashflow in the short-term. Along with that, Vi was also able to excercise the option of converting dues to equity for government.
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Reliance Jio and Bharti Airtel have managed to pay their dues on time due to stronger balance sheet than Vi. The payment cycle timeline for the receivables reduced from the threshold of 80 days to around 45-60 days. This means that the telcos are paying timely signalling an improvement in the business.
The ratings firm expects Indian telecom industry to grow at 4-6% in operating income for FY2026. The operating margins for the operators are expected to stay at 70-75%.
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ICRA said, "The improvement in collections has eased the liquidity stress in the sector, reduced reliance on external debt, and is expected to improve return metrics going forward."
Telcos have further managed to improve working capital management and reduced provisioning, allowing the cash balances to grow sigificantly. ICRA expects the cash balance for the sector to grow to Rs 5,500 - 6,000 crore. This is more than double the previous range.
Ankit Jain, Vice President and Sector Head, Corporate Ratings at ICRA, said, "An improvement in the credit profile of key telecom service providers, who are the primary clients of tower companies, has played a major role in easing the working capital cycle."
