Bharti Airtel becomes 4th listed company to cross Rs 10 trillion market cap

Market capitalisation of major telecom service provider Bharti Airtel crossed Rs 10 trillion for the first time ever after the company's stock price hit a new high of Rs 1,673.35, gaining 1 per cent on the Bombay Stock Exchange (BSE) in Thursday’s intra-day trade.

The combined market cap of Bharti Airtel (Rs 9.52 trillion) and Bharti Airtel’s partly paid shares (Rs 49,526 crore) touched Rs 10.02 trillion in intra-day trade.

At 09:36 AM, the combined market cap of Bharti Airtel (Rs 9.50 trillion) and Bharti Airtel’s partly paid shares (Rs 49,367 crore) stood at Rs 9.99 trillion, data from the BSE showed.

Currently, Reliance Industries (Rs 19.91 trillion), Tata Consultancy Services (Rs 15.86 trillion) and HDFC Bank (Rs 13.07 trillion), have market caps over Rs 10 trillion.
In the past one month, Bharti Airtel has outperformed the market by surging 14 per cent, as compared to the 4 per cent rise in the BSE Sensex. Thus far in the calendar year 2024, the stock has zoomed 62 per cent, compared to the nearly 16 per cent rally in the benchmark index.

Bharti Airtel is a global communications solutions provider with more than 550 million customers in 17 countries across South Asia and Africa. The company ranks amongst the top three mobile operators globally and its networks cover over two billion people.

Airtel is India’s largest integrated communications solutions provider and the second largest mobile operator in Africa.

Bharti Airtel saw consistent strong revenue growth in mobile services, which establishes its execution capabilities and expansion in market share win that continues.

The improvement in the company's business risk profile is supported by recent broad-based tariff hikes of 17-19 per cent on average, rolled out by Airtel in June 2024, which is expected to boost its average revenue per user (ARPU).

This, accompanied with rising data usage with the adoption of 5G services leading to subscribers up-trading, will continue to drive growth in ARPU over the near- to medium-term, according to analysts.

Bharti Airtel has a strong focus on quality customers with increasing ARPU and revenue. The management is confident of gaining industry leading growth backed by robust rural penetration and a superior services portfolio.

The company's capex, however, will remain moderate in FY25.

Management expects ARPU to improve from the current level of Rs 211 due to a richer customer mix. Aided by strong customer conversion from 2G to 4G/5G and other services, the company continues its ARPU trajectory and expects it to reach Rs 300 going forward.

Early signs of transmission are encouraging with modest SIM consolidation at the lower end. Full flow through will take two quarters, the company's management said.

Analysts at JM Financial Institutional Securities maintain a 'Buy' rating on Bharti, with a 3-year target price of Rs 2,140 as the brokerage firm believes India's wireless business tariff hikes are likely to be more frequent, going forward, given the consolidated industry structure. That apart, Jio's higher ARPU requirement also justifies significant 5G capex on top of Jio’s potential IPO.

Bharti is the biggest beneficiary of higher tariffs given the sticky and premium quality of its subscribers. ARPU growth, aided by likely moderation in capex, will drive Bharti’s free cash flow growth from FY25, enabling it to get to net cash by FY29 (vs. net debt excluding lease liability of Rs 13,510 crore at end-Q1FY25). This will also aid in accretion in equity value, the brokerage firm said in a company update.

The net leverage of Bharti Airtel improved to around 2.6 times in fiscal 2024 (compared with 3 times in fiscal 2023), despite large dues pertaining to spectrum purchase and adjusted gross revenue (AGR) led liabilities.

Furthermore, with the part payment of the Department of Telecommunications (DOT) liabilities in the first quarter of this fiscal, the net leverage is likely to improve to around 2.5 times.

As strong cash flow from the business is expected to contribute towards steady deleveraging, net leverage is expected to improve to even below 2.5 times in the near term, according to CRISIL Ratings.

From a long-term perspective, analysts at Axis Securities believe Bharti Airtel would continue to gain market share, backed by the highest penetrations, and with minimum capex requirements.

With a stronger digital portfolio supported by rising per-user data, the brokerage firm is positive about the company’s future growth.

Analysts at the brokerage firm maintain their 'Buy' rating on the stock, given the company's superior margins, stronger subscriber growth and higher 4G conversions.

However, the company's stock is trading above the brokerage firm’s target price of Rs 1,660 per share.