Bharti Airtel Shares Rise for a Third Day as Analysts Remain Positive

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The stock had risen over 6.5% last week after an apex court’s adverse ruling on adjusted gross revenue (AGR) dues weakened its rival Vodafone Idea Ltd further, raising questions over its survival in the Indian market.

Bharti Airtel Ltd shares erased early-morning losses to trade in the green territory for a third consecutive session on Monday as analysts see further upside in the stock on the prospects of a likely duopoly in India’s telecom sector.

At 10:49 am, shares of Bharti Airtel were trading at Rs 500.60, up 0.1%, after hitting the day’s low of Rs 494.25. The stock had risen over 6.5% last week after an apex court’s adverse ruling on adjusted gross revenue (AGR) dues weakened its rival Vodafone Idea Ltd further, raising questions over its survival in the Indian market.

“The company (Vodafone Idea) has no source of cash to pay the liabilities and was entirely dependent on payment relief. It has cash merely to continue operations for the next two-three quarters,” analysts at Motilal Oswal Financial Services Ltd said in a note.

Last week, the top court dismissed the review petition filed by telecom companies against the earlier verdict which ordered the telecom companies to pay their AGR liabilities within three months of the judgment date, which will be 23 January. Bharti Airtel is reportedly supposed to pay more than Rs 34,000 crore by way of AGR dues, while Vodafone Idea owes about Rs 44,000 crore to the government.

“The net debt-to-Ebitda (earnings before interest, tax, depreciation and amortization) for Bharti and Vodafone Idea increased to 4.3x and 11.6x, respectively (after the verdict),” UBS said. The recent fundraising plan will help Bharti keep gearing levels in check but Vodafone Idea will be in a weak positioning if cash is used to make AGR payment, hence the verdict is clearly negative for Vodafone Idea as it faced meaningfully large liability, it added.

Motilal Oswal said Bharti Airtel was well prepared with a Plan B as it announced fundraising of around Rs 21,000 crore last week by way of a qualified institutional placement (QIP) and foreign currency convertible bonds (FCCBs).

“The rest around Rs 13,000 crore could be funded by bank loans. Bharti’s present net debt stands at Rs 89,000 crore with Ebitda of Rs 40,000 crore in FY21. So, incremental Rs 13,000 crore would still keep net debt manageable at Rs 1,02,000 crore with 2.6x net debt to Ebitda,” it added.