Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable’ rating on the non-convertible debentures (NCDs), long-term bank facilities and corporate credit rating of Altius Telecom Infrastructure Trust (Altius). The short-term rating on the commercial paper (CP) programme has been reaffirmed at ‘CRISIL A1+’.

 

CRISIL Ratings has withdrawn its rating on Rs 1,000 crore of CP as it was redeemed. The withdrawal is in line with the CRISIL Ratings withdrawal policy (See Annexure 'Details of rating withdrawn' for details). CRISIL Ratings has received independent confirmation and other relevant documents that these instruments are fully redeemed.

 

The ratings reflect the strong business and the financial risk profiles of Altius based on the underlying assets of Summit Digitel Infrastructure Ltd (SDIL) and Elevar Digitel Infrastructure Private Limited (EDIPL; erstwhile, ATC Telecom Infrastructure Pvt. Ltd). Altius is the largest telecom tower group in India in terms of towers, with around 50% market share. The business risk profile is driven by cash flow visibility which is supported by long-term master service agreements (MSAs) of both SDIL and EDIPL’s tenancies. SDIL’s portfolio is under a 30-year MSA with Reliance Jio Infocomm Ltd (RJIL; rated ‘CRISIL AAA/Stable/CRISIL A1+) who is the anchor tenant for all its towers. The average contract tenure for EDIPL ranges from 5 to 10 years. However, around 15% of EDIPL’s tenancies will come up for renewal over the next five years. While there remains a renewal risk in EDIPL’s portfolio, the criticality of the tower infra for the telecom companies (telcos) and track record of customer stickiness provides comfort. The timely renewal of its tenancies will remain a key monitorable. The ratings also factor in stable cash flow from Crest Digitel Infrastructure Ltd (Crest; erstwhile, Space Teleinfra Pvt Ltd).

 

The ratings also reflect the healthy financial risk profile of Altius, as indicated by comfortable debt service coverage ratio (DSCR). The DSCR continues to benefit from the expected sizeable upstreaming of cash flow from SDIL (post servicing its debt obligation) and stable cash flow generation from EDIPL. The gross consolidated debt for the infrastructure investment trust (InvIT) has increased with the acquisition of EDIPL’s assets and is expected to inch up further with SDIL’s plans of acquiring telecom towers from RJIL. However, all these assets will come on-line with their associated cash flow, such that consolidated gross debt to assets under management (AUM) will remain comfortable in the near to medium term, well within the InvIT stipulations of net debt to AUM ratio of less than 70%.

 

These strengths are partially offset by susceptibility to risk related to timely renewal of tenancies and counterparty risks given exposure to mobile network operators (MNOs) with stretched credit profiles. Any material declines in tenancies of EDIPL’s portfolio along with stretched receivables from counterparties would remain monitorable.

 

Altius acts as an investment vehicle for the Brookfield group, holding underlying assets pertaining to passive telecom infrastructure. As the flagship InvIT for the group in data and telecom related infrastructure, the trust may evaluate opportunities to expand the asset base of the InvIT in future. CRISIL Ratings will continue to monitor such transactions and their impact on the business and financial risk profiles of Altius will remain a key rating sensitivity factor.

Analytical Approach

CRISIL Ratings has considered the combined business risk profile of Altius with its underlying SPVs - SDIL, EDIPL and Crest, as it holds or will hold 100% stake in each of these entities. CRISIL Ratings has considered all cash flow from EDIPL and Crest, and only surplus cash flow after servicing the SPV-level debt from SDIL to arrive at the financial risk profile of Altius.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong credit profiles of underlying assets, driven by healthy cash flow visibility: Altius’s investments in passive telecom infrastructure has inherent strengths given criticality of the sector for the telcos, high customer stickiness considering the challenges in network re-organization, and the stringent terms of the MSAs signed with the MNOs. The MSAs provide revenue visibility and make allowances for exit penalties, annual rental escalation and ensure timely payments from customers. SDIL accounts for ~70% of the tower assets of Altius, while rest are from EDIPL.

 

As on September 30, 2024, SDIL had a portfolio of 1,74,451 towers, and evaluating plans to add another 25,000 towers over fiscals 2025 and 2026. For SDIL, RJIL is the anchor tenant for all its towers, which also comprise a substantial share of RJIL’s total tenancies. The operations and maintenance (O&M) and project execution partner (Reliance Projects and Property Management Services Ltd, which has now merged with Reliance Industries Ltd) is a Reliance group entity, underscoring the business linkages. The business risk profile of SDIL is further supported by a 30-year MSA with RJIL, which ensures stable revenue with an upside coming from contracting third-party tenancies. Moreover, fixed tower usage fees and O&M cost, and pass-through of any increase in site rentals to tenants (including RJIL) protect profitability. Additionally, project execution risk is borne by the contractor and towers are transferred to the company only after completion at a fixed price.

 

Post the EDIPL acquisition, Altius’s profile now also benefits from the established market position of EDIPL in the telecom infrastructure industry, its diversified geographical presence and sizeable portfolio of 75,986 towers and healthy tenancy ratio of 1.6 times as on September 30, 2024. EDIPL has MSAs with all major Indian telcos. Most of the tenancies are with Bharti Airtel Ltd (BAL: rated CRISIL AA+/Positive), followed by Vodafone Idea Ltd (VIL) and RJIL. Moreover, higher co-location on EDIPL towers may allow Altius earnings upside in the future.

 

Crest also supports Altius’s business risk with MSAs of 5-7 years with telcos and high client stickiness, which offers stable cash flow.

 

• Comfortable financial risk profile: The financial risk profile benefits from a healthy average DSCR throughout the tenure of the existing debt. The rating also benefits from certain net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio and net debt to AUM covenants stipulated in the terms of the debt to be raised for the ATC acquisition. The financial risk profile is also supported by DSRA covering three months of debt obligation for long-term loans, and three months of interest servicing for the proposed non-convertible debentures (NCDs) to be raised at the InvIT level. 

 

As on September 30, 2024, consolidated external borrowings of Altius increased to Rs 43,049 crore from Rs 31, 204 crore as on March 31, 2024, on account of the EDIPL acquisition. At consolidated InvIT level, external debt is likely to increase over the next two fiscals because of planned capital expenditure for increasing the number of towers, however, it would be associated with its incoming cash flow. Overall, the DSCR is expected to remain comfortable.

 

CRISIL Ratings will closely monitor the leverage and any material increase that weakens the DSCR more than expected will be a rating sensitivity factor.

 

Weakness:

• Susceptibility to revenue and counterparty risk related to MNOs with weaker credit profiles: With the EDIPL acquisition, Altius now has benefits from third-party tenancies, it also exposes the InvIT to MNOs with weaker credit profiles, which will contribute to around 20% of revenue going forward.

 

However, the track record of receivables from these telcos has also considerably improved in the past few months. The ability of the MNOs to successfully manage their balance sheets and fulfill their payment obligation for telecom towers, in a timely manner, will be a key monitorable.

Liquidity: Superior

Stable cash flow with long-term revenue visibility will comfortably cover the debt obligation, leading to a healthy DSCR at a consolidated level. CRISIL Ratings expects the trust to have consolidated operating cash accrual of over Rs 8,000 crore in fiscal 2025, which should suffice to meet the debt obligation of around Rs 4,200 crore across SDIL, EDIPL and Crest. Moreover, high quality and long life of assets beyond the tenure of debt should help Altius refinance on a timely basis at competitive rates, as demonstrated over the last few quarters.

Outlook: Stable

Altius will continue to benefit because of steady cash flow from SDIL, EDIPL and Crest, and revenue visibility from medium and long-term MSAs.

Rating sensitivity factors

Downward factors:

• Downgrade in the rating of SDIL by one or more notches or material weakening of cash flow of SDIL, impacting surplus available at Altius
• Sustained weakening of average DSCR for the tenure of debt, for instance, due to higher-than-expected leverage or material weakness in EDIPL’s cash flow resulting from stretched receivables

About the trust

Altius is an InvIT sponsored by BIF IV Jarvis India Pte Ltd (BIF IV or sponsor; rated ‘CRISIL AA/Stable’) and Project Holdings Nine (DIFC) Ltd.  with Data Link Investment Manager Private Limited (Data Link) as its investment manager and Axis Trustee Services Ltd as the trustee.

Altius (formerly Data Infrastructure Trust) was incorporated by Reliance Industrial Investments and Holdings Ltd (RIIHL; a wholly owned subsidiary of RIL) on January 31, 2019, as a trust under the provisions of the Indian Trusts Act, 1882. The trust was registered as an InvIT with the Securities and Exchange Board of India (SEBI) on March 19, 2019. In August 2020, upon receipt of approval from the Department of Telecommunications, BIF IV became the sponsor to the InvIT. The units of the InvIT got listed on the Bombay Stock Exchange in September 2020.

 

SDIL, the first investment of the trust, operates and manages tower assets that have been acquired from RJIL. In March 2022, Altius acquired Crest, a leading indoor coverage solutions provider in India. In September 2024, Altius has completed the acquisition of ATC India which has now been renamed as Elevar Digitel Infrastructure Private Limited.

 

About Summit Digitel Infrastructure Ltd

SDIL is an SPV formed by transfer of tower assets and a portion of liabilities by RJIL. In December 2019, RIIHL entered into a binding agreement with Brookfield Asset Management Inc (Brookfield) for investment of Rs 25,215 crore by the latter in the units issued by Altius, after which Altius holds 100% stake in SDIL. As of March 31, 2024, SDIL had 1,74,451 telecom towers across India with RJIL as the anchor tenant.

 

About Crest Digitel Infrastructure Ltd

Crest, incorporated in April 2016, is a neutral host provider (IP-1), deploying digital indoor solutions by providing 2G/3G/4G networks through a common shared infrastructure. The company owns and operates shared in-building communications infrastructure, which is used by wireless carriers, broadcasters and other communications companies to provide services to end users. The company offers solutions, including for in-building and outdoor small cells, among other services.

 

About Elevar Digitel Infrastructure Private Ltd

InvIT acquired 100% share in the Indian-arm of US-based telecom operator, American Tower Corporation. As of March 31, 2024, EDIPL had around 76,000 telecom towers across India, with tenancies contracted with all major MNOs.