Broker’s Call: Bharti Airtel (Buy)

CMP: Rs. 494

Target: Rs. 591

The Indian rupee’s depreciation and the sharp fall in crude will have implications for Bharti Airtel but cash generation should be able to offset the impact. The impact could emanate from: 1) USD-denominated debt; 2) equipment imports; and 3) crude export-dependent African countries.

Given that nearly 50 percent of Bharti’s CapEx is billed in the USD, the depreciation of the INR will impact cash flows. The sustenance of the INR at >Rs. 74/USD could increase Bharti’s CapEx spends by 5 percent for FY21E.

If the Centre continues to pass on the benefits, the sharp correction in crude oil prices would have a positive impact on India network operating expense. However, this correction and the sustenance of low oil prices could impact African economies and pose risks to growth prospects there.

The Africa business is on a strong position to absorb any near-term impact, with healthy EBITDA and lower debt compared with FY16. We remain positive on the stock with strong fundamentals in the India business, with recent tariff hike. Retain ‘Buy’ with a target price of Rs. 591.

―The Hindu Business Line