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While Airtel shares haven’t really budged since it reported impressive results for its Africa business, investors now need to grapple with the fact that the company has delivered strong results across various divisions (Photo: Mint)
While Airtel shares haven’t really budged since it reported impressive results for its Africa business, investors now need to grapple with the fact that the company has delivered strong results across various divisions (Photo: Mint)

Bharti Airtel's strong results hold a mirror up to pessimistic investors

Bharti Airtel’s performance in nearly all operating segments was ahead of expectations

The Bharti Airtel Ltd stock has been a bit of a conundrum lately. Although the company is expected to be a key beneficiary of Vodafone Idea Ltd’s problems, the stock recently flirted with its post-covid lows seen in March. While it has recovered a bit to 430 levels, it has still underperformed the market by about 30% in the past three months.

The company’s September quarter results will certainly challenge the pessimistic sentiment around the stock. Bharti Airtel’s performance in nearly all its operating segments was far ahead of expectations. In the key India mobile business, revenue grew 7.4% sequentially to 13,832 crore. Its customer base jumped 5% sequentially after being flat for several quarters. Growth was driven by high-value 4G customers, which rose 10.4% quarter-on-quarter.


With a majority of subscribers consuming data, average revenue per user (Arpu) rose to 162, up 3.3% from the June quarter. Most of the incremental revenue flowed over to the profit line, and Ebitda margins of the mobile division rose by over 500 basis points sequentially. Ebitda stands for earnings before interest, tax, depreciation and amortization.

The upshot: Airtel’s India mobile Ebitda rose 12.8% sequentially and as much as 47.6% year-on-year. For perspective, Kotak Institutional Equities and Jefferies India analysts estimated Ebitda growth of 3.5-4% sequentially for the division. “The huge jump in subscriber base suggests high market share gains from Vodafone Idea," said an analyst from a domestic institutional brokerage.

The segment also reported earnings before interest and tax of 2,440 crore, which signifies that it has returned to profits at the pre-tax level after a long gap. While the firm doesn’t break-out its interest costs across divisions, it is estimated that finance costs of its India mobile business were at 1,100-1,200 crore.

Other highlights included 5% sequential growth in home broadband customers, and 5-6% sequential increase in Ebitda of the digital TV and enterprise divisions. Airtel Africa had reported a huge 16% sequential jump in profit in constant currency terms.

While Airtel shares haven’t really budged since it reported impressive results for its Africa business, investors now need to grapple with the fact that the company has delivered strong results across various divisions. And compared to the 2-3% increase expected in consolidated Ebitda, the company reported an 11.4% sequential increase in profit.

Sell-side analysts have been screaming buy for the stock for a while now, with all 27 analysts tracked by Bloomberg having a buy/overweight rating. The median target price for the stock is 684, nearly 60% higher than the current market price. Investors may be perturbed about Reliance Jio’s increasing dominance in India’s telco market, especially after its record fundraising earlier in the year. But as Airtel’s Q2 results show, it is clearly premature to write it off yet.

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