Hold Bharti Airtel; target of Rs 410: KRChoksey

KRChoksey has maintained hold rating on Bharti Airtel with a target price of Rs 410 in its May 4, 2011 research report.

“Bharti Airtel, India’s the largest telecom service provider may raise up to USD 1 billion in the form of debentures and will have a tenure of 10 years. The proposal will be put up before the company's board on May 4, when it meets to discuss results for the financial year-ended March 11. The proposal is expected to be cleared during the meeting.Banks and individuals in the global market will subscribe the debentures. The final amount to be raised will depend on the interest rate the company gets and the response from promotional roadshows, the official added.The proceeds of the issue will go towards refinancing part of the debt raised by Bharti to acquire Kuwaiti Zain's operations in 15 African countries.”

“Bharti has debt of USD 13.5 billion as on end of Q3FY11. The average interest rate for the same is 5.5% per annum. We assume that the company will raise USD 1 billion via bonds with coupon rate of 3.5%. Considering this money will be used to retire debt taken for Zain acquisition, it would have a very small impact on net profit margin. Although net profit margins will improve, we believe it will have a neutral impact on valuation as net debt remains unchanged.”

“In the current environment which is growing increasingly competitive, Bharti’s leading market share and diversified business model will give it a strategic advantage over peers. While the results of Q1FY10 clearly indicate a plateau in terms of profitability from the mobile business, the company’s dominant volume growth, visibility of earnings and diversified business model justify its premium compared to peers. 3G roll out; increasing revenues from African market will boost revenues going forward. We have HOLD recommendation on the stock with target price of Rs 410, by assigning 9.5 EV/Ebitda to FY12E earnings,” says KRChoksey research report.

FIIs holding more than 30% in Indian cos

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Attachments : BhartiAirtel_KRC_050411.pdf