Bharti Airtel rallies 9% in two days after SC's verdict on AGR dues

Shares of Bharti Airtel climbed 2 per cent to Rs 559 on the BSE on Wednesday, rallying 9 per cent in the past two trading days after the Supreme Court allowed staggered payments towards settlement of Adjusted Gross Revenue (AGR) dues.

The court, on Tuesday, allowed staggered payments towards settlement of AGR dues over 10 years period, starting April 1, 2021. Also, the telcos are asked to pay 10 per cent of AGR associated dues by March 31, 2021. The decision on AGR dues has come after several rounds of hearings by the Supreme Court.

“The industry will need higher ARPUs from the current level to pay the AGR dues in the 10 year timeline. The industry average revenue per user (ARPU) is estimated to have stood at Rs 82 in the June 2020 quarter. This ARPU is much lower than the average ARPU of Rs 124 during FY16 when Reliance Jio had not entered the telecom market,” CARE Ratings said in telecom sector update.

Motilal Oswal Securities believes that with the Smartphone market largely settled and prevailing low ARPUs, there is a strong case for a price hike. However, given the challenging economic environment, the brokerage firm sees limited possibility on an immediate basis.

“In order to survive, if Vodafone Idea triggers a price hike or if the market turns duopoly, Bharti would benefit significantly in both cases, with a potential Ebitda increase of >Rs 10,000-Rs 12,000 crore,” the brokerage firm said in telecom sector update. It maintains ‘buy’ rating on Bharti Airtel with target price of Rs 700 per share.

At 11:44 am, Bharti Airtel was trading 1.6 per cent higher at Rs 556 on the BSE, against 0.11 per cent gain in the S&P BSE Sensex. A combined 20.4 million equity shares have changed hands on the counter on the NSE and BSE so far.