Sunil Mittal, promoter and chairman, attending investor contact to interact with investors is a huge self-assurance booster. Bharti sees enormous possibilities, and fresh capital infusion will assistance company’s balance sheet in investment to accelerate development. It does not see any capital allocation in non-core enterprise. Capex investment in 5G spectrum (which the business believes will come about early next year), fibre and information centre are its priorities. It does not see any requirement of spectrum right after 5G gives extended-term FCF visibility. Digital investment has been slow, but is shaping excellent monetisation will be only at Bharti Airtel level, which could lead to worth maximisation, in our view.
It sees net debt to Ebitda at 2x quickly, supported by asset monetisation and FCF. Bharti expecting ARPU at Rs 200 in FY22 is ambitious, but really should provide comfort on income and FCF development. We have reduce our Ebitda estimates by ~3% for FY22/ FY23e on annual report updation. However, we have improved the TP to Rs 712 (from Rs 675) as per realigned debt and Ind AS-116 effect. Maintain Buy.
Rights proceeds to fund future development and deleverage: Bharti has announced rights situation of Rs 210 bn. Issue is priced at `535 (10% discount to Friday ahead of last’s closing value) and rights entitlement of 1 share for just about every 14 shares held on record date. It stated the fund will be utilised to grab ‘once in a life time opportunities’ in mobile enterprise (5G and fibre), FTTH (expand homepass) and information centre. Investment in India entity of OneWeb will be restricted to $7-8 mn. Additional 5% equity stake in Indus Towers has provided Bharti more manage more than Indus Towers, which is a crucial asset for mobile enterprise.
Capex in mobile enterprise to be steady to slightly larger: The business believes 5G auction will come about early next year with rollout beginning H2CY22 onwards in big cities and towns. However, excluding spectrum, business does not see a great deal rise in network capex due to completion of 4G capex and modular BTS rollout and investments in core. It sees fibre investment to accelerate for strengthening backhaul and assistance FTTH enterprise.
Digital investment slow, but progressing effectively: Bharti believes companies have shaped effectively, such as Wynk, Airtel IQ and so on. The restructuring program will place all digital assets in parent entity, and it has committed separate digital income disclosure in the future. Bharti does not want to divest stake only in digital entity, and any strategic investment will have exposure to all companies, which we think could lead to worth maximisation for shareholders.
Sees net debt to Ebitda at 2x: Company remains confident of reaching net debt to Ebitda of 2x in close to term helped by wholesome FCF generation and asset monetisation. Bharti believes it has 3 non-assets, which it would like to monetise at correct time and worth – stake in Indus Towers, fibre assets and genuine-estate.
ARPU to develop to Rs 200 in FY22: Bharti believes ARPU really should rise to Rs 200 (vs Rs 146 in Q1FY22) in FY22 itself. It has currently taken tariff intervention in corporate postpaid category and prepaid base pack nevertheless, the most preferred prepaid 4G tariff stay unchanged. We note Reliance Jio has lately launched Freedom program exactly where it has reduce information allowance by 45% which is moving towards tariff hike.