Analysts’ Take On 100% FDI In Bharti Airtel Units
A vendor arranges Bharti Airtel Ltd. SIM card packets at a stall in Mumbai, India. (Photographer Dhiraj Singh/Bloomberg)

Analysts’ Take On 100% FDI In Bharti Airtel Units

Analysts remained bullish on Bharti Airtel Ltd. as the telecom operator received regulatory approval to raise foreign direct investment limit to 100% in subsidiaries. That had prompted the stock to hit a record high before cooling off.

The Sunil Mittal-owned carrier said it’s initiating the process to revise FDI limit with immediate effect. The company had recently won approval from the Department of Telecommunications to raise FDI limit to 100% in three subsidiaries — Bharti Hexacom, Bharti Telesonic and Bharti Teleport.

The development, according to Edelweiss Alternative Research, can result in inflows worth $600-700 million into the carrier.

All the 32 analysts tracking Bharti Airtel recommend a ‘buy’. The average of Bloomberg consensus 12-month price targets implies an upside of 15.9%.

Also read: Bharti Airtel Receives Regulatory Approval For 100% FDI In Subsidiaries

Here’s what analysts have to say...

Morgan Stanley

  • Maintains ‘overweight’ rating with a price target of Rs 680 apiece.
  • Some subsidiaries were still awaiting certain approvals which led to MSCI rebalancing in August 2020 and significant outflows.
  • Developments on this front can reverse the underperformance of August.
  • Upside risk: Faster-than-expected price recovery across buckets and robust subscriber addition, Ebitda margin expansion from cost controls, Africa continuing to do well.
  • Downside risk: Higher churn/price erosion due to increased competitive intensity, homes/enterprises business facing more disruption due to Reliance Jio and pressure on free cash flow from high capex intensity and low profitability.

CLSA

  • Maintains ‘Buy’ rating with a price target of Rs 730 apiece.
  • Top pick in the telecom sector.
  • Growth in data subscribers and tariff hikes will sustain growth.
  • Gearing is comfortable ahead of March spectrum auction.
  • Rising free cash flow, potential adjusted gross revenue relief and Indus Tower stake sales can help deleveraging.
  • Forecast consolidated Ebitda CAGR of 16% over FY21-23.
  • Stock is inexpensive at a 10% discount to its five-year average EV/Ebitda.

Credit Suisse

  • Maintains ‘outperform’ rating with a price target of Rs 700 apiece.
  • Stage set for increase in MSCI weight at next index review in February 2021.
  • MSCI upping weight can drive more than $1 billion incremental flows.
  • “Like Bharti Airtel fundamentally as we expect it to be favourably placed in the medium to long term.”
  • View it as a beneficiary in the case of a near-term price hike
  • In case of a delay, challenges for Vodafone Idea may increase, pushing the sector towards further consolidation with Bharti Airtel being one of the two beneficiaries.

Shares of Bharti Airtel rose as much as 6.4% on Wednesday to an all-time high of Rs 601.8 apiece, before paring the gains. The stock is up for the third straight day.

Also read: Here’s What CLSA Expects In India’s Telecom Sector In 2021

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