Buy Bharti Airtel; target of Rs 380: Motilal Oswal


Motilal Oswal’s research report on Bharti Airtel

Bharti Airtel’s (BHARTI) board has approved an INR320b fund raise, which includes a rights issue of INR250b and perpetual bonds with equity credit of INR70b (foreign denominated). Issue price of INR220/share implies an issuance of 1,134m rights shares, which would result in 22% post equity dilution. The fund raise is likely to bring down net debt/EBITDA sharply to 3.5x (FY19), as against the current estimate of 4.5x. Additionally, the plans of Africa IPO and Bharti Infratel stake sale will help raise INR400b, which should reduce its net debt to INR475b (net debt to EBITDA of 1.6x) by FY21. Moreover, we believe that capex intensity has peaked out, which should reduce its annual cash burn from INR169b in FY19 to positive FCF of ~INR43b in FY21, thus restricting the increase in net debt.


Outlook

In our view, despite the steep dilution, the fund raising plan is a welcome positive which will allow BHARTI to be self-sufficient and manage operations without any ARPU increase. Maintain Buy with a target price of INR380.

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First Published on Mar 19, 2019 02:57 pm

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