Voda Idea, Bharti Airtel rally despite hefty Q2 losses: What analysts say
Vodafone Idea has estimated a liability of Rs 44,150 cr post the apex court order.
After falling as much as 10 per cent in the opening trade, Vodafone Idea closed 24.75 per cent higher at Rs 3.68 on BSE. Meanwhile, Bharti Airtel closed up 8.42 per cent at Rs 393.20 after falling as much as 2.27 per cent in the early trade.
Vodafone Idea posted a loss of Rs 50,921 crore -- the highest-ever quarterly loss by any corporate in India. And Bharti Airtel's loss figure for the quarter stood at Rs 23,045 crore. Both of the telecom players have made provisions for their liabilities arising from the Supreme Court order in their latest September quarter results.
Vodafone Idea has estimated a liability of Rs 44,150 crore post the apex court order, and made a provision of Rs 25,680 crore in the second quarter of the current fiscal.
Airtel said its net loss was on account of exceptional charge pertaining to the provisioning of Rs 28,450 crore towards the AGR dues, which included principal of Rs 6,164 crore, interest of Rs 12,219 crore, penalty of Rs 3,760 crore, and interest on penalty of Rs 6,307 crore.
7 worst ever quarterly losses in India Inc's history
Global brokerage UBS maintained 'Buy' call on Airtel with a target price of Rs 415 per share. The brokerage said the stock in attractively valued, however, the capex intensity slowed in the quarter. It added the firm posted a solid operating performance but the focus shifted towards AGR liabilities.
Brokerage firm Emkay Global Financial Services maintained ‘Buy’ rating on Airtel with a 12-month target price of Rs 432. “Bharti Airtel posted better-than-expected operating performance, along with a moderation in capex spends. India Mobile EBITDA continued to improve and Africa business remained on the right track, helping quell any qualms about Bharti’s operational performance,” it said.
“The AGR penalty will undoubtedly impact Bharti Airtel’s balance sheet and borrowing costs. Further, given the quantum of the penalty, we believe that Bharti will have to raise capital to keep leverage under check. We have assumed that Bharti will gain 40 per cent of VIL’s revenues/subscribers, while Jio might garner a higher share of 60 per cent,” Emkay said.
The Supreme Court has upheld the government’s position on including revenue from non-telecommunication businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which has to be paid as licence and spectrum fee to the exchequer.
“Voda Idea’s operational performance has been subdued, ARPUs are down, so is subscriber addition. Opex synergies of Rs 15.8 billion have been realised, which is at a run rate of 75 per cent of target synergies, which is as per expectations, but it is the network investments and 4G gaps and subscriber losses versus Bharti and Jio which continues to hurt the carrier,” said Rajiv Sharma, head of research at SBICap Securities.
ICICI Securities said, "Government move on AGR issue in terms of relief will hold key ahead. We highlight that this penalty if levied in totality will be huge stress on the balance sheet and tall ask even for Bharti. Therefore, uncertainty will remain till there is a definite resolution or clarity on overall final payout."