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Bharti Airtel's stock rises as part of a plan to buy Indus Towers' stock and pay off delayed liabilities.

The company has made a part prepayment of Rs 8,815 crore on outstanding liabilities related to spectrum acquired in the 2015 auction.


Bharti Airtel's stock jumped on March 28 after the firm announced that it will buy 4.7 percent of Indus Towers from a Vodafone Group Plc affiliate for Rs 187.88 per share, for a total transaction value of Rs 2,388.06 crore.

Bharti Airtel has also agreed to purchase a 7.036 percent share in Avaada KNShorapur, a special purpose company set up to own and operate a captive power plant.

In addition, the company's subsidiary Nxtra Data has agreed to purchase an 11.334 percent share in Avaada KNShorapur.

The prepayment is for the FY27 and FY28 instalments.

Airtel has cleared Rs 24,334 crore of delayed spectrum liabilities well ahead of schedule in the last four months, according to the company.

These liabilities had a ten percent interest rate and were paid off using a combination of strong free cash created by the firm, equity proceeds, and much lower cost debt of comparable tenure, according to the company.

Motilal Oswal

We believe the stock has significant upside potential due to: a) incremental ARPU improvement opportunities through market share gains, tariff hikes, and customer upgrades, b) growth in non-mobility businesses, including value unlocking in multiple digital/enterprise segments, and c) a re-rating of valuation multiples backed by improving ROCE/FCF profile due to ARPU growth and higher share of non-mobility business, raising customer stickiness.

While a 5G-driven increase in expenditure intensity remains a warning flag, our channel checks show that lower spectrum pricing and moderate capex as a percent of revenue over the next 3-5 years, along with the Rs 160 billion uncalled Rights issuance, would guarantee that FCF and net debt are well managed.

Maintain a buy rating with a target price of Rs 910, representing a potential upside of 28%.

CLSA

The stock gets a buy rating from the research firm, with a target price of Rs 915 per share. Enterprise and broadband are also showing signs of improvement.

Digital assets such as Airtel Payments Bank and Nxtra can now be monetized by the corporation. Non-mobile revenue is outpacing mobile revenue, and the Airtel Black converged offering has significant prospects.

Jefferies

The stock gets a buy rating from the brokerage company, with a target price of Rs 860 per share. It is in a strong position to expand its mobile, home broadband, and enterprise businesses in India. It has taken steps to improve customer experience and rework its go-to-market strategy.

Bharti Airtel was trading at Rs 712.75 on the BSE at 09:38 hours, up Rs 3.50 or 0.49 percent.

On November 24, 2021, the stock reached a 52-week high of Rs 781.90 and a 52-week low of Rs 490.15, respectively.


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