Monetisation options may drive Bharti Airtel rerating as growth accelerates

Stock marginally outperformed the benchmarks over the past three months

Telecom major Bharti Airtel has multiple triggers going for it both on the operational as well as valuation fronts. Ongoing premiumisation, tariff hike in the second half of CY26 and robust customer addition across key segments could boost revenue and profitability going ahead.

 

Further, the initial public offering (IPO) of Airtel Money (Africa) in the later half of this year and the discount to Jio’s estimated valuations provide support to the stock. The stock has marginally outperformed the benchmarks over a three-month period and is currently trading at 34 times its FY27 earnings, at ₹1,910 apiece.

 

Given that its capital expenditure (capex) intensity is past its peak and the investment in rollout of 5G network is complete, the firm is well placed to benefit from multiple monetisation opportunities across its key segments and geographies. This will not only help drive free cash flows but also help it to deleverage its balance sheet. 

 

Prashant Biyani and Yashi Jain of Elara Securities expected an average revenue per user (Arpu) growth of 7 per cent over FY26-29 period led by tariff hikes and premiumisation. Postpaid upgrade, migration to 4G and 5G and bundled offerings will continue to support monetisation, they added.

 

Given the rising adoption of 5G and increased data usage as well as a low telecom tariff will lead to an upward shift in tariffs resulting in pricing power and long term Arpu growth. The brokerage believes that Bharti Airtel is a potential candidate for a valuation rerating on the back of a progressive dividend policy and structural return ratio expansion coupled with earnings compounding. It has a buy rating with a target price of ₹2,427.

 

The company’s focus on scaling up adjacencies both in India and Africa including data centre, non-banking financial services foray, sovereign cloud offerings, rising stake in Indus Towers and Airtel Money (Africa) offers multiple funding/monetisation options.

 

The company is set to raise $1.5 billion to $2 billion by taking its Africa mobile money business public later in CY26. The IPO values Airtel Money at $10 billion up four fold from 2021, implying 60 per cent of Airtel Africa’s market capitalisation, points out CLSA Research.

 

Airtel Money’s FY26 revenue was up 36 per cent to $1.4 billion while its operating profit rose 31 per cent to $689 million. Given that Airtel’s biggest market, Nigeria, has yet to ramp up mobile money with only 2.7 million subscribers, strong growth for the business will likely continue.

 

CLSA has an outperform rating with a target price of ₹2,310. On the valuation front, Nomura Research believes that Airtel’s discount to Jio is not justified given its better financial metrics than the larger peer. Bineet Banka and Abhishek Bhandari of the brokerage pointed out that after adjusting Airtel's market capitalisation with the quoted value of its Africa, Indus and Nxtra holdings, the implied FY28 estimated enterprise value to operating profit of the India telecom business at current price is 9.3 times, which is well below the 12.2 times implied multiple on Jio’s (unlisted) likely valuation.

 

This is despite Airtel recording a higher Arpu (₹257 vs Jio’s ₹214 in FY26), better margins and stronger free cash flow. A premium operator priced at a discount to its main rival is unwarranted, providing reasonable upside potential, they added. The company is its top pick in the sector with a higher target price of ₹2,355.

 

The near-term direction for the stock will come from Q1FY27 results as well as investments and progress on new

 

businesses.  Its performance in Q1FY27 is expected to be similar to that of Q4FY26 when it reported a consolidated revenue growth of 15.7 per cent and operating profit growth of 16.6 per cent over the year ago quarter. Consolidated revenue and operating profit growth year-on-year in the June quarter is expected to be 17 per cent each.

 

On a sequential basis, Bharti Airtel is expected to register 2.5 per cent growth in India wireless revenue and a 2.6 per cent growth in operating profit.

 

The gains, according to JM Financial Research, would be led by 4 million mobile broadband subscriber gains, healthy overall wireless subscriber additions and likely 1.5 per cent quarter-on-quarter (Q-o-Q) rise in Arpu due to one more day Q-o-Q, continued upgrades and improved subscriber mix.

 

The brokerage believes that the industry’s wireless Arpu is likely to grow at 12 per cent annually over FY26–28, driven by regular tariff hike and multiple premiumisation strategies. It has a buy rating with a target price of ₹2,450.