Here Is Why Bharti Airtel Shares Are Shining

After three consecutive sessions of losses, shares of Bharti Airtel jumped almost 6 percent on BSE in intraday trade on November 25.

The stock saw traction following reports that the company, along with Vodafone Idea, had filed applications in the Supreme Court for a review of its judgment on Adjusted Gross Revenue (AGR).

The country’s top court, on October 24, ruled against the telcos in a 14-year-old dispute on the definition of AGR, which formed the basis for payment of statutory dues. The court ruled that non-telecom revenues should be included in AGR for the payment of licence fee and the spectrum-usage charge.

As of November 22 close, shares of Bharti Airtel have gained almost 47 percent against a 12 percent gain in the benchmark Sensex in calendar 2019.

CLSA, in its latest report, has maintained a ‘buy’ recommendation on the stock and raised the target price to Rs 515 from Rs 415 per share.

The foreign brokerage has raised FY21-22 ARPU estimates by 1 percent and revenue estimates by 2 percent for Bharti Airtel.

Meanwhile, media reports suggested Bharti Airtel, Reliance Industries and three others are likely to bid for the assets of debt-ridden Reliance Communications on November 25.

The last date to submit bids will end on November 25 and the committee of creditors of Reliance Communications will also meet on the same day to open bids.

Industry experts say the company’s peak capex is behind and with a strong network and spectrum capability, it is well placed compared to its peers.

In a recent report, brokerage firm Motilal Oswal said even in the case of limited government relief, Bharti Airtel may survive with a potential duopoly structure. The consequent strong growth potential could offset regulatory pressures.

On similar lines, Edelweiss Securities said amidst uncertainties with respect to the government’s stance on AGR-related liabilities, Bharti Airtel is relatively well placed, considering Rs 18,800 crore cash on books and its ability to raise requisite capital.

“In the absence of any government support, we see this market heading towards a duopoly, which is likely to boost Bharti’s market share. If government support comes through, the current market structure will remain intact and we expect Bharti to continue to gain market share, albeit at a slower pace,” Edelweiss Securities said.

But risks such as cut-throat competition and a tight cash flow loom on the stock.

Sameer Kalra, the founder of Target Investing, said any price hike will only go to lenders and government. It would not increase net cash-flow resulting in better valuations.

According to the PTI latest report, Bharti Airtel faces a liability of around Rs 62,187 crore, including the share of Tata Group of companies and Telenor India.

“Amid the looming liability of Rs 34,260 crore for Airtel, we believe that waiver on AGR- related payment will hold the key,” ICICI Direct said.—Money Control