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With end to MSCI overhang in sight, Airtel stock reclaims 600 mark

Airtel added 3.6 million new customers in October, taking its total wireless customer base to 330.3 million in the month. (Photo: Mint)Premium
Airtel added 3.6 million new customers in October, taking its total wireless customer base to 330.3 million in the month. (Photo: Mint)

  • Earlier this week, Bharti Airtel said it has got approvals for its relevant downstream investments and that it has initiated process to revise its FII limit to 100%. Following which, the National Securities Depository Ltd updated the foreign investment limit for Bharti Airtel to 100% from 49%

MUMBAI: Shares of telecom operator Bharti Airtel were under pressure last year after MSCI Emerging Market Index reduced its weightage by 15 basis points in August. One basis point is one hundredeth of a percentage point.

On Thursday, MSCI said Bharti Airtel will be a part of its February 2021 quarterly index review. This means that weight of the stock may increase significantly in the index, attracting foreign investors.

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Responding to the development, Bharti Airtel shares rose more than 4% on the NSE on Friday to 603.90. With that, the stock is at a kissing distance from its 52-week high of 612 seen in May last year.

To put things into perspective, MSCI’s weightage review in August was based on available public data which said foreign ownership through automatic route for Bharti Airtel is 49% and will remain so until the company complies with the conditions.

While Airtel got a nod from the Department of Telecommunications to increase its foreign investment limit to 100% of the paid up capital in January 2020, some of its subsidiaries were awaiting approvals. Consequently, the MSCI cut stock's weightage, which caused significant selling by foreign investors in the stock.

Earlier in this week, Bharti Airtel said it has received approvals for its relevant downstream investments and it had initiating process to revise its FII limit to 100%. Following which, the National Securities Depository Ltd updated the foreign investment limit for Bharti Airtel to 100% from 49%.

"Thus, the weight of Bharti may increase materially in MSCI index and consequent buying by FIIs/FDIs. This coupled with superior execution (market share gain in 4G vs. Jio in recent months) and potential price increase may lead to further re-rating in Bharti," analysts at Dolat Capital Market Pvt India Ltd said in a note on 12 January.

Due to the technicalities involved in the process, there were speculations that MSCI would consider Bharti Airtel's weightage rebalancing only in its May review. The earlier-than-expected announcement could also be aiding sentiment for the stock.

Meanwhile, data Telecom Regulatory Authority of India showed that Airtel added 3.6 million new customers in October, taking its total wireless customer base to 330.3 million in the month.

In the September quarter, Bharti Airtel’s performance in most of its operating segments exceeded expectations. In its key India mobile business, revenue grew 7.4% sequentially to Rs13,832 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.

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