Airtel correction 'overdone': Analysts; tariff hikes, Jio IPO key triggers

Bharti Airtel hosted an investor conference call recently to address questions around capital allocation and the company's outlook

Bharti Airtel recently hosted an investor conference call to address questions about capital allocation and the company’s outlook. At 9:29 AM, Bharti Airtel's share price was down 1.01 per cent at ₹1,860.7 per share. In comparison, BSE Sensex was down 1.07 per cent at 80,420.09.

Bharti Airtel investor call takeaways: 

• The committed Airtel Money (unlisted) investment of ₹20,000 crore will be done gradually over the years, with 10-15 per cent to be invested in the first year.
• The company will adopt a progressive dividend policy going forward as free cash flow (FCF) generation accelerates.
• Singtel may continue to sell its 7 per cent treasury shares in Bharti Airtel gradually over the next few years as they consolidate their investments in Associate companies.
• Bharti Airtel will likely continue to increase its stake in Indus Towers from 51 per cent currently, and they have board approval for another 5 per cent stake.
• British Telecom stake will continue to be with the promoter entity, and there are no plans for Bharti Airtel to buy promoter stakes in British Telecom.
• Bharti Airtel will consolidate its stake in Airtel Africa (63 per cent currently) by purchasing 16 per cent stake from the promoter family.

Brokerages on Bharti Airtel 

Nomura | Buy | Target: ₹2,300

The brokerage expects Bharti Airtel’s India mobility business to deliver an average revenue per user (ARPU) compound annual growth rate (CAGR) of 9.8 per cent over FY25–FY28F, which it estimates will translate into an Earnings before interest, tax, depreciation and amortisation (Ebitda) CAGR of around 19 per cent over the same period.

 

 

Nomura added that Bharti Airtel is trading at what it termed an attractive valuation of 9.3x FY27F EV/EBITDA and 7.9x FY28F EV/Ebitda, based on its estimates.

Motilal Oswal Financial Services | Buy | Target: ₹2,355

Analysts said that shares of Bharti Airtel recently corrected by approximately 6 per cent, wiping out nearly ₹70,000 crore in market capitalisation following the announcement of its foray into the non-banking financial company (NBFC) sector. However, the brokerage believes investors’ concerns regarding capital allocation are likely exaggerated.

 

The brokerage noted that while the ₹20,000 crore outlay for the NBFC venture (70 per cent of which will be funded by Bharti) shifted the focus to the company’s spending plans, the Chairman’s recent investor call addressed key anxieties around promoter stake sales, succession planning, and the rationale behind the new business.

 

Motilal Oswal highlighted that, barring the historical Zain acquisition, the promoters have a "stellar" track record of judicious capital allocation. The brokerage advised investors to view Bharti for its potential growth opportunities rather than solely as a dividend play. 

 

The report estimates that Bharti could generate over ₹1.3 trillion in FCF between FY26 and FY28. With stable capex trends and potential tariff hikes, the company is expected to turn net cash (excluding leases) by FY28.

 

On the valuation front, following the recent price correction, Bharti’s India business is trading at an implied valuation of 10x FY28 Ebitda, which the brokerage finds attractive. Motilal Oswal models a CAGR of 13 per cent in revenue and 15 per cent in Ebitda over FY26–28, driven by:

• A projected 15 per cent tariff hike in India Wireless starting July 2026.
• Accelerated growth in Home Broadband net additions.
• Strong double-digit constant currency growth in the Africa business. 

Near-term triggers for the stock include the impending tariff hike, the potential Jio Platforms (JPL) initial public offer (IPO), and a favourable resolution of the adjusted gross revenue (AGR) matter. The brokerage’s bull-case target for the stock stands at ₹2,875, while the bear-case is pegged at ₹1,810.

 

For investors specifically worried about capital misallocation in the parent company, Motilal Oswal suggested Bharti Hexacom (BHL) as a "pure-play" alternative. The brokerage recently upgraded BHL to ‘Buy’ with a target price of ₹2,000, noting it offers exposure to Bharti’s fast-growing wireless and broadband businesses with lower diversification risk. 

JM Financial Institutional Securities | Buy | Target: ₹2,455

The brokerage also reckons that the recent stock price correction—triggered by a ₹20,000 crore foray into the NBFC sector— is overdone. It views the NBFC move as a "natural adjacency" that leverages Airtel’s 370 million-plus customer base and existing fintech experience in Africa and India, noting that the investment will be spread over a long period. 

 

While acknowledging concerns over a persistent 8.5 per cent promoter stake sale overhang and potential delays in tariff hikes, JM Financial expects a price increase within the next six months to align with the anticipated Jio Platforms IPO and government objectives. The brokerage remains bullish on the company’s growth, forecasting 14–15 per cent Ebitda compounding over the next 2–3 years, driven by a steady 10–11 per cent ARPU CAGR, and finds the current valuation of 10x FY28 EV/Ebitda attractive.  Disclaimer: Views and recommendations are those of the brokerage/analyst and are not endorsements. Readers should exercise discretion.