S&P sees strong earnings growth ahead for Bharti Airtel

Growing data consumption and a fundamental improvement in Indian and African telco markets will help expand Bharti Airtel’s earnings. In India, we project Bharti Airtel’s subscriber numbers to increase by 3%-4% over the next year and average revenue per user to grow by 5%-7%. Bharti Airtel’s India operations will benefit from higher consumer spending on telco services, as well as subscriber additions. This will stem from growing data consumption and the company’s efforts in driving premiumization. Churn from other players will also support earnings growth in India.

Operating performance at Bharti Airtel’s African businesses is stronger than we expect, and we anticipate it will outpace India’s business earnings over the next 12-24 months. Under our base case, we project the African customer base to grow 9%-11% annually, and 5%-7% annual growth in ARPU in U.S. dollars through the fiscal year ending March 31, 2028. The rebasing of Africa’s earnings also reflects their local currencies’ relative strength against the Indian rupee (INR), which has depreciated 5%-7% against the U.S. dollar over the past six months.

We forecast the company’s consolidated EBITDA will increase by 8%-10% annually over the subsequent two years, after a 28.0% increase in fiscal 2026 (year ending March 31). Over the same period, we estimate that Africa earnings will rise to 25%-27% of Bharti Airtel’s consolidated EBITDA, up from our previous estimates of about 20%.

Expanding earnings and higher operating cash flows can help offset rising capital expenditure (capex) and dividends. Bharti Airtel will likely increase capital spending to fund new growth drivers. We forecast capex to rise annually and reach about INR565 billion by fiscal 2028, up 25% from INR452 billion in fiscal 2026.

The company will use the increased capex for its data center business (Nxtra Data Ltd.), cloud services, and its African operations. Meanwhile, Bharti Airtel’s India financial services segment would require more capital investments as it ramps up more meaningfully over the next few years. We do not anticipate that the company will need to spend large amounts on spectrum auctions at least until fiscal 2030, when its next band of spectrums will be up for renewal.

Bharti Airtel’s dividends will likely continue to step up. We forecast total cash dividends will rise to about INR230 billion in fiscal 2027 and about INR350 billion in fiscal 2028. This follows a 65%-75% annual increase in the past two fiscal years from a low base.

Even with higher discretionary spending, we think rising earnings will help discretionary cash flow (DCF) remain more than adequate. Under our base case, we project annual adjusted DCF (after lease capex) to be INR220 billion-INR240 billion through fiscal 2028.

We believe Bharti Airtel will build ample financial flexibility at the ‘BBB+’ ratings. Strong discretionary cash flow will drive further deleveraging. We forecast the company’s ratio of funds from operations (FFO) to debt will be 50%-52% in fiscal 2027 and approach about 60% in fiscal 2028. This compares with our estimate of 43.8% in fiscal 2026. Unless there are any transformational events in the company or industry, this balance sheet capacity will accumulate over time.

The company’s incentive to continue reducing debt is likely to diminish over time given we project its leverage to be lower than the Asia Pacific telco median. If so, the company could undertake other capital allocation decisions, such as acquisitions and higher shareholder returns. Even without considering any earnings accretion from acquisitions, we estimate Bharti Airtel can tolerate an outlay of more than INR800 billion and keep its FFO-to-debt ratio above 45% in fiscal 2028.

In addition to our expectation of strong free cash flow, Bharti Airtel has strong access to debt and equity capital markets. For example, the company raised about INR220 billion (about 10% of adjusted debt) in March 2026 by calling on the remaining rights issue in 2021 (INR157 billion) and raising US$1 billion (about INR95 billion) cash proceeds at Nxtra Data Ltd. (Of this, Bharti Airtel contributed US$290 million).

Debt at Bharti Airtel’s parent will remain a watchpoint. This is because Bharti Telecom Ltd. has no operations of its own aside from owning equity stakes in Bharti Airtel. Even though Bharti Telecom has in the past raised equity to service its own financial obligations, the rising debt level carries the risk of depending on dividends from Bharti Airtel to service its debt.

We believe there are substantial rights conferred by the shareholder agreement between the two key shareholders toward the strategy and cash flows of Bharti Airtel. Consequently, we do not add debt at Bharti Telecom to our adjusted metrics for Bharti Airtel. However, we will continue to monitor any material change to the previously mentioned arrangement, which, if results in unilateral rights to any single party, can cause us to reevaluate the approach.

Debt at Bharti Telecom could rise further. Over the past five years, Bharti Telecom has largely raised debt to acquire equity stakes in Bharti Airtel, including subscribing to the company’s rights issue in March 2026. We estimate that Bharti Airtel’s FFO-to-debt ratio could be about 10% lower through fiscal 2028 if we include the debt at Bharti Telecom in our calculations. This estimate assumes debt at Bharti Telecom remains broadly stable at INR467 billion (as of March 31, 2026).

Our view of Bharti Airtel’s creditworthiness is not constrained by our ratings on the Indian sovereign. In our view, the company’s ability to maintain sound liquidity amid hypothetical sovereign stress scenarios has gradually improved. Consequently, we believe Bharti Airtel would not face liquidity pressure even during periods of sovereign stress.

The company derives close to 75% of its EBITDA domestically from India. We also estimate that about 16% of the company’s adjusted debt is denominated mainly in U.S. dollars and euros as of March 31, 2026. Consequently, we believe Bharti Airtel’s liquidity position would be manageable in times of hypothetical sovereign stress because of the company’s strong and rising earnings and cash flow.

The stable rating outlook reflects our expectation that Bharti Airtel’s expanding earnings and cash flows amid rational industry competition will improve its balance sheet strength over the next 12-24 months. We forecast the company’s FFO-to-debt ratio will improve to above 50% over the same period.

We may lower the ratings if Bharti Airtel’s leverage does not improve and its FFO-to-debt ratio stays below 45%. This could materialize if:

• Higher competition in India or Africa business results in significantly weaker earnings than we anticipate; or
• Bharti Airtel undertakes large debt-funded investments, capex, and dividends that are beyond our expectations.

Downward rating pressure could also stem from a material increase in debt at the Bharti Telecom stand-alone entity, or from a deterioration in the company’s ability to withstand hypothetical sovereign stress.

We may raise the ratings on Bharti Airtel if it further deleverages, such that its FFO-to-debt ratio improves and remains above 60%, with a financial tolerance and acquisition appetite that supports a lower leverage level. An upgrade would also depend on the company’s market position, earnings, and cash flow remaining solid.

CT Bureau