In the past one month, the stock has underperformed the market by falling 9 per cent, as compared to a 2 per cent rise in the S&P BSE Sensex. It is 6 per cent away from its 52-week low of Rs 277 touched on October 22, 2018, on BSE in the intra-day trade.
"The downgrade reflects uncertainty as to whether or not the company's profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telco market," says Annalisa DiChiara, a Moody's Vice President and Senior Credit Officer.
Moody's estimates the profitability of Bharti's Indian mobile segment will remain low over the next several quarters in the absence of a fundamental change in the pricing of mobile services, together with a proportional shift in the composition Bharti's subscriber base to high-end 4G customers. However, the company has taken steps to improve revenues and profitability including its minimum recharge plans, it added.
The negative outlook also reflects that expected asset sales are subject to market timing and/or require regulatory and shareholder approvals, therefore raising execution risks with respect to the amount of proceeds ultimately raised, as well as the timing of their completion.
The rating outlook could be stabilised if Bharti strengthens its credit profile, with stabilization of its core Indian mobile and non-mobile services, Moody’s said in a statement.