AIRTEL HITS ARPU MILESTONE DESPITE MARKET TURBULENCE

On a net basis, FIIs have invested Rs 46,618 crores to purchase Indian stocks in July 2023, nearly matching the figure of Rs 47,148 crores from the previous month of June. This marks the fifth consecutive month of positive net inflow from Foreign Portfolio Investors. After this nearly five-month strong rally in Indian stocks, analysts and fund managers were slightly cautious about the expensive valuations. They expected a correction in the costly Indian stock markets as it was overdue.

Last week brought a surprising move from Fitch Ratings, as they downgraded the US Sovereign Credit Rating by one notch, shifting it from AAA to Aa+. This action shocked the financial community. Fitch explained that fiscal deterioration resulting from a bloated government debt and a decline in governance standards prompted this downgrade of the world’s largest economy, the USA. While the Sensex corrected by almost 1000 points in two days, Indian analysts are not excessively worried about this global risk-off sentiment, despite the rise in volatility and the potential impact on global economic growth. Similarly, in 2011, another major rating agency, Standard & Poor’s, had echoed a similar sentiment by downgrading the US from its AAA rating. However, major brokerages are asserting that the US economy is much stronger now than its financial position twelve years ago. The recent downgrade has been largely quantified and assessed, with minimal movement observed in two sectors: the dollar index and US Treasury Bonds.

After a challenging, exciting decade of ten years, Sunil Mittal, the Chairperson of Bharti Enterprises, realized a dream as Bharti Airtel, a leading telecom player, achieved an Average Revenue Per User (ARPU) milestone of Rs 200 per month. ARPU is a crucial metric for telecom companies, capturing the monthly average revenue per user. Recently, the company made a prepayment of Rs 8,024 crores to the Department of Telecom, addressing deferred liabilities related to spectrum acquired in an auction eight years ago in 2015. This amount carried a 10% interest rate. Bharti Airtel believed that it could utilize much lower-cost financing available elsewhere to significantly reduce its interest expenses. This prepayment will help the company save on annual interest costs and substantially boost cash flows. Meanwhile, Bharti Airtel recently reported its Q1 FY24 financial quarterly numbers, with a net profit of Rs 1,612 crores, driven by robust and competitive growth across all business segments. The primary dent in profits was due to foreign exchange losses incurred by the company’s overseas operations in Africa. Bharti Airtel is aiming to introduce next-gen mobile broadband services on a national level by the end of this calendar year, anticipating a substantial increase in revenue and net profit over the next few quarters. Any further increase in tariffs and an ARPU of
Rs 300 per user can propel the company to the next level. Analysts and fund managers hold a bullish outlook on the Bharti Airtel stock, which is currently trading at Rs 890 on the stock exchanges. They anticipate appreciation over the next one-year time frame. Portfolio investors can consider purchasing Bharti Airtel stock after seeking advice from their brokers and investment advisors for steady long-term returns.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.