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Bharti Airtel-Warburg Pincus DTH deal: here’s what brokerages have to say

While analysts at BofA, CLSA and Credit Suisse, among others, expect Bharti Airtel Ltd.’s move to buy back 20% stake in its direct-to-home unit from Warburg Pincus to help the Sunil Mittal-led carrier focus on digital and non-telecom segments, Jefferies has doubts.

Analysts at Jefferies in a note said the parent’s investment in Bharti Telemedia Ltd. is difficult to justify, since the DTH market offers limited growth given high TV penetration in India. On the contrary, UBS sees the deal as a positive from a strategic standpoint.

The transaction, worth Rs 3,126 crore, will give Bharti Airtel full control of Bharti Telemedia. The telecom operator will issue 3.65 crore equity shares on preferential allotment at Rs 600 apiece, and will pay up to Rs 1,037.8 crore in cash, according to a statement.

After issuance of shares, there will be a stake dilution of 0.67% in Bharti Airtel, whereas Warburg Pincus’ stake on a fully-diluted basis will be 0.66%.

Shares of Bharti Airtel fell as much as 1.5% to Rs 586.1 apiece before paring losses. The stock is down for the second straight day.

Here’s what analysts have to say…


  • The rationale behind the transaction appears to be full control of DTH, especially as Bharti Airtel is looking to offer its bundled product ‘One Home’ to compete against Reliance Jio Infocomm Ltd.
  • Consider this transaction a win-win for both parties.
  • Bharti’s board constituted a ‘special committee of directors’ for the reorganisation of businesses and the shareholding structure of the company.
  • The reorganisation will help to achieve the required flexibility and focus on digital and non-telecom businesses.
  • Bharti Airtel would be giving potential investors an option to acquire its digital assets without investing in telecom assets.
  • Do not consider the announcement to be material enough for any major stock price movement; maintains ‘neutral’ rating.


  • Consider this deal as marginal negative.
  • The deal offers an attractive exit to Warburg Pincus with a return of 40% over a 2.5-year holding period.
  • The transaction will raise Bharti Airtel’s stake in Bharti Telemedia to 100% from 80% at present.
  • Surprised by this move as there was no compulsion for Bharti Airtel to buy its stake back from Warburg Pincus.
  • Bharti Airtel has invested Rs 6,000 crore over the past three months which raises questions around its strategic intent.
  • The funds could have been used to acquire Rs 9,000-12,000 crore worth of spectrum in the upcoming auctions or to make investments in the digital space.


  • Deal is part of Bharti Airtel’s larger strategy for reorganisation of businesses and shareholding structure.
  • Will lead to a sharper focus on its digital businesses and potential future value unlocking.
  • The deal implies a valuation of 7.6 times EV/Ebitda (based on annualised Q3 FY21 Ebitda) and an equity value of $2.1 billion.
  • DTH business is 3-5% of Bharti Airtel’s Indian operations revenue and Ebitda.
  • With 1.8 crore subscribers, DTH is integral to Bharti Airtel’s differentiated and converged solutions to offer subscribers its ‘One Home’ strategy.

Credit Suisse

  • The deal will lead to alignment of interest with Bharti Airtel looking to expand its Airtel One offering, which bundles its mobility, broadband and DTH.
  • Constitution of a special committee is in line with recent comments by the chairman to carve out digital businesses as a sister concern of Bharti Airtel and create a common holding company which will house the regulated telecom and digital businesses.
  • Market will look for additional details of the group reorganisation for value unlocking over medium term.


  • Bharti Airtel DTH business subscribers have increased from 1.4 crore to 1.8 crore since December 2017.
  • DTH business will continue to act as a cash cow and a funnel for the broadband business.
  • “However, considering small scale of DTH business in the overall scheme of things, the deal does not change our view on the company as well as valuation framework.”


  • Rates the deal announcement a positive.
  • With Telemedia’s underlying trailing 12-months Ebitda of Rs 2,100 crore, the deal EV appears reasonable at 8 times TTM Ebitda.
  • DTH ARPU growth and Ebitda improvement (2 times over FY16-20) track record has been better than mobile, considering the lower competitive intensity.
  • Bharti Airtel’s DTH net additions have been quite robust due to market share gains from Dish TV.
  • DTH should continue to progress as the uptake in rural India has been strong.

Kotak Securities

  • Bharti Airtel’s focus on digital and non-telecom segments are steps in the right direction.
  • The calibrated approach in shaping up its non-telecom digital service offerings aligned with its homes and enterprise businesses, may drive significant growth in the medium term.

Motilal Oswal

  • The transaction will increase the company’s net debt by Rs 940 crore to Rs 14,8400 crore, that is FY21 estimated net debt-to-Ebitda of 3.3 times.
  • The risk of a digital disruption, the outlook for the DTH industry and valuations may have only weakened in the last three years.
  • The management is upbeat on the prospects of the DTH business, given the low penetration of the DTH industry, lower linear TV prices, and better DTH services versus cable at a lower incremental price.
  • Bharti’s DTH services has clocked a healthy 18% Ebitda CAGR over FY17-20 to Rs 2,000 crore and is well placed in an industry.


  • The stake purchase in the DTH arm is a positive strategic move although small from a NAV perspective.
  • The deal makes strategic sense, as it would give Bharti Airtel better control over the entire content distribution — wireless, fixed broadband and DTH — and provide more flexibility in setting bundled prices.
  • Tactically it may appear like the company is repurchasing what it sold in December 2017, however, it is important to highlight that the sale to Warburg Pincus was done at a time of severe balance sheet stress triggered by Reliance Jio’s onslaught. Bloomberg Quint


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