Result Update

July 29, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Bharti Airtel (BHATE)

Buy
| 435
12 months
16%

All eyes on how data market unfolds

Whats changed?
Target
EPS FY17E
EPS FY18E
Rating

Changed from | 380 to | 435

Changed from | 14.9 to | 14.2
Changed from | 19.1 to | 20.1
Unchanged

Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT

Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%)

25,572.9 23,680.8
8.0 24,983.2
2.4
9,574.5 8,256.2
16.0 9,135.8
4.8
37.4
34.9 258 bps
36.6 87 bps
1,462.0 1,554.3
(5.9) 1,290.4
13.3

Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY15
92,135
31,323
5,184
13.0

FY16
96,619
34,093
5,484
13.7

FY17E
102,621
38,305
5,691
14.2

FY18E
112,117
42,288
8,050
20.1

FY16
27.3
31.7
7.0
2.3
6.1
9.4

FY17E
26.3
30.6
6.2
2.2
8.7
10.8

FY18E
18.6
21.6
5.3
2.0
10.7
12.3

Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

FY15
28.8
33.5
7.0
2.4
9.7
10.3

Stock data
Particulars
Market Capitalization (| Crore)
Total Debt (FY16) (| Crore)
Cash (FY16) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
149,502.8
95,043.0
3,708.7
219,730.8
418 / 290
1,998.7
5.0

Price performance
Bharti Airtel
RCOM
Idea

1M
4.1
6.5
0.8

3M
-0.1
-11.1
-16.9

6M
27.7
-17.2
0.3

| 372

12M
-9.2
-21.8
-37.8

Research Analyst
Bhupendra Tiwary
bhupendra.tiwary@icicisecurities.com
Sneha Agarwal
sneha.agarwal@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Revenues came in higher-than-expected with strong traction in the

Airtel enterprise business performance, which grew 13% QoQ to
| 2679.3 crore. Airtel posted in-line voice traffic growth of 2.2% QoQ
to 314.8 billion minutes. Voice ARPM grew 0.7% QoQ to 33.49 paisa
vs. estimates of 33.42 paisa resulting in voice revenue growth of
3.0% QoQ to | 10543.7 crore
Data subscribers grew by a mere 1.2% to 5.8 million. Data usage per
subscriber, however, grew 5.2% QoQ to 904 MB per user leading to
7.7% QoQ growth in data volumes to 158 billion MB. Data ARMBs
declined 2.5% QoQ to 22.3 paisa with data revenues posting 5.0%
QoQ growth to | 3525.7 crore. African revenues continued to remain
subdued as they posted a decline of 3.1% QoQ to | 6249.3 crore
The EBITDA margin came in better-than-expected at 37.4%, up 87
bps QoQ, aided by India margin of 41.7% (up 80 bps QoQ) and
African margins of 22.3% (up ~30 bps QoQ). Margins were primarily
aided by lower employee and marketing costs
PAT came in at | 1462.0 crore (vs. expectation of | 1212.4 crore). The
deviation can be attributed to a mix of higher operating performance
and exceptional items. Airtel received a net tax benefit of | 224.1
crore, which includes net gain of | 112.2 crore on account of
recognition of deferred tax on earlier business combination
New subscriber addition in data slows down, volumes key monitorable
The addition of new data subscribers has seemingly slowed down as
visible from a mere 1.2% QoQ growth to 58.9 million subscribers, which
can be attributed to slower smartphone penetration by the management.
Though there is an increase in data usage per subscriber, which grew
5.2% QoQ to 904 MB, the decline in data realisations would continue to
suppress overall revenues from data. The telcos had recently, in
anticipation of the upcoming launch by Reliance Jio, offered several
discounts in terms of 45-67% higher data for the same price for above 2
GB packs. Airtel has also launched several sachet packs for low-end
users. We expect a 11.0% & 9.0% decline in data realisations to 21.4 &
19.5 paisa in FY17E & FY18E, respectively. Data volumes and revenues
are expected to grow at 42.0% and 27.0% CAGR in FY16-18E to 999
billion (bn) MB and | 19518.2 crore, respectively.
African revenues to decline while subsidiary sale, currency impact
Reported revenue in Africa declined 3.6% YoY (1.9% QoQ) due to
currency impact from Nigeria and divestment of business in Burkina Faso
and Sierra Leone. The Nigerian Naira devalued 42.1%. The complete
impact of this will be visible from Q2FY17. In addition, the sale of
businesses in Burkina Faso and Sierra Leone, which accounted for~7-8%
of the African revenues and were of a superior margin profile, will impact
the Africa financials. We build in 10% revenue dip and 170 bps margin
contraction for Africa business in FY17, owing to the above factors.
Superior margin performance heartening, rate as BUY; target price: | 435
There have been two major overhangs clouding the prospects of the
telecom sector: the upcoming spectrum auctions and the impending Jio
launch. Airtel, being the market leader, is well placed to weather the
storm. The only thing to watch out is how the data story unfolds in India
with the prevalent challenges of low smartphone penetration and data
tariff war. We continue to maintain BUY with a revised target price of |
435, on a DCF based methodology.

Variance analysis
Q1FY17 Q1FY17E Q1FY16 Q4FY16
25,572.9 25,188.8 23,680.8 24,983.2

Revenue

YoY (%) QoQ (%)

8.0
2.4

Employee Expenses
Marketing Expenses

1,114.4
3,951.4

1,287.5
4,101.4

1,211.5
3,992.1

1,240.4
4,033.1

-8.0
-1.0

-10.2
-2.0

Access Charges
Network Operating
License Fee

2,704.1
5,678.6
2,549.9

2,675.4
5,505.1
2,532.2

2,741.9
5,154.8
2,310.1

2,694.8
5,374.4
2,504.7

-1.4
10.2
10.4

0.3
5.7
1.8

EBITDA

9,574.5

9,047.6

8,256.2

9,135.8

16.0

4.8

37.4

35.9

34.9

Depreciation

5,040.2

4,851.9

4,040.4

4,816.3

24.7

4.6

Interest
Exceptional Items

1,942.4
353.6

1,760.6 1,927.6
0.0 -1,431.4

1,715.9
300.0

0.8
-124.7

13.2
17.9

Total Tax

1,008.9

1,356.6

2,178.1

1,076.2

-53.7

-6.3

PAT

1,462.0

1,212.4

1,554.3

1,290.4

-5.9

13.3

255.7
314.8
414.0
33.5

255.9
314.1
413.0
33.4

230.7
290.8
423.9
34.9

251.2
308.0
415.2
33.3

10.9
8.3
-2.3
-4.13

1.8
2.2
-0.3
0.72

EBITDA Margin (%)

Subscribers (Mn)
Total Minutes (Billion) (Minutes)
MoU (Minutes)
Voice ARPM (Paisa)

36.6 258 bps 87 bps

Comments
Revenues came in higher-than-expected with strong traction in the Airtel
enterprise business performance, which grew 13% QoQ to | 2679.3 crore.
Reported revenue in Africa declined 3.6% YoY (1.9% QoQ) due to African
currency depreciation against US$ and divestment of business in Burkina
Faso and Sierre Leone

The company has been focusing strongly on war on waste, hence,

eliminating any kind of unwarranted expenditure

The reduction in access charges on the India front as data revenues increase
as a percentage of total revenues had led to improved margins in India
operations
Margins in the quarter got a boost from the margin expansion seen in the
African business as well as lower-than-expected access charges. The
margins could have been better but was impacted by the sale of high margin
generating African subsidiaries
The depreciation charge was higher due to the spectrum related amortisation

The exceptional items included several components the major ones being the
impact of | 1006.7 crore gain on account of divestment of stake in subsidiary
and | 946 crore pertaining to the translation impact of Nigerian currency
Airtel received a net tax benefit of | 224.1 crore, which includes net gain of |
112.2 crore on account of recognition of deferred tax on earlier business
combination
The deviation can be attributed to a mix of higher operating performance and
exceptional items

Source: Company, ICICIdirect.com Research

Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)

FY17E
FY18E
Old
New % Change
Old
New
103,731.3 102,621.0
-1.1 113,042.1 112,116.6
37,827.0
36.5

38,304.7
37.3

1.3
86 bps

41,448.5
36.7

42,287.8
37.7

5,943.2

5,691.1

-4.2

7,650.1

8,050.2

EPS (|)
14.9
14.2
Source: Company, ICICIdirect.com Research

-4.2

19.1

20.1

PAT

% Change Comments
-0.8 The African revenues have been pruned down to factor in the impact of stake sale in
the subsidiary and depreciation of the Nigerian currency
2.0
105 bps Though the African margins have been revised downwards as some of the higher
margin earning subsidiaries are excited by the company, superior performance in
the India business will keep overall margins intact
5.2 The depreciation and interest costs estimates have been revised upwards in line
with Q1FY17 leading to a reduction in PAT estimates in FY17
5.2

Assumptions

India
Wireless Subs (Mn)
ARPU
Total Minutes (Bn)

Current
FY17E
FY18E

FY15

FY16

226.0
198.1
1,080.1

251.2
193.0
1,171.4

267.4
196.2
1,260.9

281.6
204.5
1,317.1

409.1
34.1

405.2
33.6

399.8
33.9

MOU
417.1
Voice ARPM (Paisa)
37.4
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Earlier
FY17E FY18E

Comments

267.6
281.8
196.9
205.1
1,259.1 1,327.4 The voice volume growth would face some cannibalisation from data as the latter
picks up even strongly making us revise our FY18E estimates slightly downards
404.5
402.7
33.6
33.8

Page 2

Company Analysis
Data growth softens with low subscriber addition
Mobile subscribers have grown at a rapid pace for Airtel, with the
company reaching 255.7 million subscribers as on Q1FY17 from a mere
61 million in FY08. However, the alarming fact in the quarter was the low
data subscriber addition of 1.2% QoQ to 58.9 million subscribers.
Exhibit 1: Subscriber details
1,030

1,080

1,171

1,261

1,317

1,400
1,200

260

1,000

In Million

210

110

800

281.6

160

267.4

251.2

226.0

205.5

600

(in Billion)

310

400

60

200
0

10
FY14

FY15

FY16

FY17E

Mobile Subscribers

FY18E

Total Minutes (Billion)

Source: Company, ICICIdirect.com Research

Exhibit 2: Data volume, data subscribers trend

73.0

1010

65.6

60.0

46.4

810
Billion MB

70.0

58.2

58.1

50.0
40.0

610

30.0

410

20.0

210
10

80.0

Million

1210

146.6

287.2

497.7

717.2

999.7

FY14

FY15

FY16

FY17E

FY18E

Data Volume

10.0
-

Data Subscribers (RHS)

* subscribers decline in FY15 due to change in definition to account for only subscribers using more than 1MB data
*

Source: Company, ICICIdirect.com Research

The addition of new data subscribers has seemingly slowed down as

visible from a mere 1.2% QoQ growth to 58.9 million subscribers which
was attributed to slower smartphone penetration by the management.
Low-price handset buyers would continue to buy feature phones with a
ticket size of | 500-1000 vs. smartphones priced at ~| 3000 levels and the
decline in the smartphone pricing could aid data penetration. Over the
long term, the management believes the industry should have 500-550
million smartphone users. Smartphone penetration in the Bharti India
subscriber base is 25-30% but 3G subscriber penetration is at 14%.
Though there was an increase in data usage per subscriber, which grew
5.2% QoQ to 904 MB, the decline in data realisations would continue to
suppress overall revenues from data. Telcos had recently in anticipation

ICICI Securities Ltd | Retail Equity Research

Page 3

of the upcoming launch by Reliance Jio offered several discounts in terms

of 45-67% higher data for the same price for above 2 GB packs.
Airtel has also launched several sachet packs for low end users. We
expect a 11.0% & 9.0% decline in data realisations to 21.4 & 19.5 paisa in
FY17E & FY18E, respectively. Data volumes and revenues are expected to
grow at 42.0% and 27.0% CAGR in FY16-18E to 999 bn MB and | 19518.2
crore, respectively.
Exhibit 3: Data ARPU, data usage per subscriber
235

1400
192

1200

207

200.0

1000
124

600

150.0
(|)

MB

800

100.0

69

400
200

250.0

50.0
240.5

0
FY14

458.2

793.0

965.4

1,201.9

FY15

FY16

FY17E

FY18E

Data Usage Per Sub

Data ARPU

Source: Company, ICICIdirect.com Research

Airtel posted in line voice traffic growth of 2.2% QoQ to 314.8 billion
minutes. Voice ARPM grew 0.7% QoQ to 33.49 paisa vs. estimate of 33.42
paisa resulting in voice revenue growth of 3.0% QoQ to | 10543.7 crore.
The increase in voice realisation is a positive sign but the important thing
is that such an increase should be visible on a sustainable basis.
Going ahead, voice traffic and revenues are expected to remain stable
around current levels. The growth coming in from new subscriber
addition would be offset by some cannibalisation to data. We build in a
6.0% FY16-18E CAGR in voice revenues to | 44597.6 crore aided by
similar growth in voice minutes to 1317 billion minutes, factoring in a
0.4% decline in voice realisations to 33.8 paisa over the same period. Any
aggressive stance by Reliance Jio towards voice pricing will cause
industry wide repercussion and, hence, be a downside risk to our
estimates.

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 4: MoU and ARPM trend

430

36.8
436

Minutes

420

38.0
37.0

37.4
417

36.0
409

410
34.1

400

33.6
405

33.9
400

390

35.0

Paisa

440

34.0
33.0
32.0
31.0

380
FY14

FY15

FY16

MoU - LHS

FY17E

FY18E

Voice ARPM (|) - RHS

Source: Company, ICICIdirect.com Research

African revenues to decline whilst currency impact and stake sale

Reported revenue in Africa declined 3.6% YoY (1.9% QoQ) due to
currency impact from Nigeria and divestment of business in Burkina Faso
and Sierra Leone. The Nigerian Naira was devalued by 42.1% the
complete impact of which will be visible from Q2FY17. In addition, the
sale of businesses in Burkina Faso & Sierra Leone, which accounted
for~7-8% of African revenues and were of a superior margin profile, will
impact the Africa financials. We build in 10% revenue dip and 170 bps
margin contraction for Africa business in FY17, owing to the above
factors.
Exhibit 5: Africa business details (US$)
Particulars
Total revenues
EBITDA
EBITDA %
PBT
Net Income

FY14
4,490.6
1,175.0
26.2%
(321.2)
(534.8)

FY15
4,406.0
997.2
22.6%
(479)
(580)

FY16E
4,055.7
852.3
21.0%
NA
NA

FY17E
3,680.9
711.7
19.3%
NA
NA

FY18E
3,934.5
770.7
19.6%
NA
NA

Source: Company, ICICIdirect.com Research

Passive infra
Bharti Infratel owns 38642 towers while Indus Towers (Bharti Infratel
holds 42% stake) owns another 120739 towers, with tenancy of 2.12x and
2.26x, respectively. The passive infrastructure segment of the company
has been highly profitable with EBITDA margins at ~47.0% recorded in
the quarter. Bharti Infratel is in the mode of changing the master service
agreements with telcos to reduce the arbitrage between old tenants
paying high rent and new tenants paying lower rent. This could lead to
slow growth in the short-term, as the 2.5% rental escalation may not be
visible for a sizeable chunk of tenancies. It is NPV neutral over the longer
term as the older agreement period have been extended.
Going ahead, we expect the segment revenue to grow at 7.4% CAGR
(FY16-18E) to | 6480.5 crore. This would be primarily led by rising
tenancy as telcos will need to set up more base stations to cater to rising
data demand.

ICICI Securities Ltd | Retail Equity Research

Page 5

Exhibit 6: Passive infrastructure details

Particulars
BTIL Towers
BTIL Tenancy
Indus Towers
Indus Tenancy

FY14
35,905.0
1.86
113,008.0
2.0

FY15
37,196.0
1.98
115,942
2.13

FY16E
38,458.0
2.09
119,881
2.22

FY17E
39,224.5
2.17
123,660
2.30

FY18E
40,494.9
2.29
126,655
2.41

Source: Company, ICICIdirect.com Research

Homes services, enterprise segment

Airtel has realigned the Telemedia business and the enterprise business
segments in the following manner effective from the current quarter.
1. Homes Services: Erstwhile Telemedia Services comprised: i)
Homes business providing fixed line telephone and broadband
(DSL) services to retail customers, and ii) Corporate fixed line
voice and fixed line data business. Effective quarter ended June
30, 2016, the company has realigned the reporting of its corporate
fixed line voice and fixed line data business with Airtel Business
and accordingly Telemedia Service renamed to homes services.
The homes services saw 4.0% QoQ subscriber growth to 2.02
million subscribers. The average revenue per line (ARPL),
however, posted a decline of 3.0% QoQ to | 1118
2. Airtel Business: Effective the quarter ended June 30, 2016, the
company has realigned the reporting of its corporate fixed line
voice and fixed line data business (erstwhile reported under
Telemedia Services) with the Airtel business. It has been seen that
the Airtel business performance has been stellar at 13.0% QoQ
growth to | 2679.3 crore as per the new reporting adopted by the
company.
Airtel DTH segment
Airtel is not only performing well in its mobility India business but has
also emerged as one of the strong DTH players with a substantial
subscriber base of ~12.1 million, with stellar addition of 4.2 lakh
subscribers in the quarter. The ARPU grew 4.4% QoQ at | 233. We expect
the DTH business to witness 18.8% CAGR in FY16-18E to reach | 4119.6
crore by FY18E.

ICICI Securities Ltd | Retail Equity Research

Page 6

Exhibit 7: Revenue break-up (| crore)

Particulars
India
Mobility
of which voice
of which data
of which other VAS
Homes Services*
Enterprise
Passive Infrastructure
Others

FY14

FY15

FY16E

FY17E

FY18E

46,683.4
38,665.3
4,447.0
3,571.1
3,935.2
6,336.1
5,108.7
2,387.2

51,963.6
40,940.9
7,905.7
3,117.0
4,432.4
6,713.1
5,428.2
2,766.9

56,081.8
40,582.2
12,231.2
3,268.4
4,760.9
7,803.2
5,617.4
3,222.3

61,849.4
43,002.0
15,581.2
3,266.2
2,875.9
11,125.8
5,992.1
3,946.7

68,322.1
45,226.7
19,793.6
3,301.8
3,241.5
12,587.1
6,480.5
4,435.0

Africa*
27,248.8
26,907.0
25,133.3
22,993.9
24,000.6
South Asia
1,740.3
1,575.9
1,645.4
1,590.6
1,670.9
Total Gross Revenue
93,439.6
99,787.1
104,264.1
110,374.4
120,737.6
Intersegmental Elimination
-7,693.4
-7,747.7
-7,732.0
-7,779.8
-8,621.0
Net Reveue
85,746.2
92,039.4
96,532.2
102,594.6
112,116.6
*WE continue to report the prior period figures as per the previous reporting and have not restated the prior period
telemedia numbers. The future projections are as per the new reporting standards.
Source: Company, ICICIdirect.com Research

Bharti has undertaken divestment of 11 African tower assets and two

African subsidiaries in Burkina Faso and Sierra Leone for a total
consideration of US$3.25 billion. Out of this, two tower deals are yet to be
consummated (Niger, DRC). The Sierra Leone deal was, however,
concluded in Q2FY17. The proceeds from these three transactions would
help the company carry out its de-leveraging in its balance sheet.

ICICI Securities Ltd | Retail Equity Research

Page 7

Valuation
There have been two major overhangs clouding the prospects of the
telecom sector: the upcoming spectrum auctions and the impending Jio
launch. Airtel, being the market leader, is well placed to weather the
storm. The only thing to watch is how the data story unfolds in India with
the prevalent challenges of low smartphone penetration and data tariff
war. We continue to maintain BUY recommendation with a revised target
price of | 435, on the DCF based methodology.
Exhibit 8: DCF assumptions
Particulars
WACC
Revenue CAGR over FY16E - FY22E
PV of Cash Flow Till Terminal Year
Terminal Growth
Present Value of terminal cash flow
PV of firm
Less: Net Debt
Total present value of the Equity (excluding current cash)
Number of Equity Shares outstanding
DCF - Target price (|)

Amount
10.5%
8.2%
66,003.3
3.8%
196,203.3
262,206.6
88,328.4
173,878.2
399.7
435

Source: Company, ICICIdirect.com Research

Exhibit 9: Valuations

FY15
FY16
FY17E
FY18E

Sales
(| cr)
92,135.1
96,619.3
102,621.0
112,116.6

Growth
(%)
7.3
4.9
6.2
9.3

EPS
(|)
13.0
13.7
14.2
20.1

Growth
(%)
86.9
5.8
3.8
41.5

PE
(x)
28.8
27.3
26.3
18.6

EV/EBITDA
(x)
7.0
7.0
6.2
5.3

RoNW
(%)
9.7
6.1
8.7
10.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

RoCE
(%)
10.3
9.4
10.8
12.3

Recommendation History versus Consensus

500

80.0
70.0
60.0

400

40.0

(%)

(|)

50.0
30.0

300

20.0
10.0
200

0.0
Jul-14

Sep-14

Dec-14

Feb-15

Price

May-15

Jul-15

Idirect target

Oct-15

Dec-15

Consensus Target Mean

Mar-16

May-16

Jul-16

% Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Aug-11
Feb-12

Event
Acquires 100% interest in Telecom Seychelles Ltd, a telecom operator of Seychelles, for an enterprise value of US$62 million
Supreme court cancels licenses - gives way to lower competition in the industry

Nov-12
May-13

Spectrum auction post license cancellation takes place. These auctions reduce several players to regional operators
Bharti recieves $1.26 billion investments from Qatar Foundation

Jun-13

Pricing power returns to operators. ARPMs starts showing upward momentum

Dec-13

Enters into infrastructure sharing arrangement with Reliance Jio Infocomm

Feb-14

February 2014 auctions held for 900/1800 MHz spectrum with a total outlay for Airtel involving | 18530 crore & industry outlay involving | 61162 crore

Jun-14

The company divests its 3100 towers from its African towers to Helios Towers

Mar-15
Mar-16

Auctions held for 800, 900, 1800, 2100 MHz band. Total payout for Airtel is of | 29130 crore
Bharti Airtel (Airtel) enters into definitive agreement with Videocon Telecommunications to acquire the right to use spectrum (2*5 MHz
spectrum in the 1800 MHz band) in its six circles of Bihar, Haryana, Madhya Pradesh, UP (East), UP (West) and Gujarat for a consideration of | 4428 crore

Apr-16

Bharti Airtel enters into a definitive agreement with Aircel Ltd and its subsidiaries to acquire the right to use spectrum (20 MHz spectrum in the 2300 MHz band) in
its eight circles of Tamil Nadu (including Chennai), Bihar, Jammu & Kashmir, West Bengal, Assam, North East, Andhra Pradesh and Odisha for a consideration of ~|
3500 crore

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Name
Bharti Enterprises, Ltd.
Singapore Telecommunications Ltd
LIC Mutual Fund Asset Management Company Ltd.
Three Pillars Pte. Ltd.
ICICI Prudential Life Insurance Company Ltd.
Dodge & Cox
The Vanguard Group, Inc.
Comgest S.A.
ICICI Prudential Asset Management Co. Ltd.
Franklin Templeton Asset Management (India) Pvt. Ltd.

Shareholding Pattern
Latest Filling Date % O/S Position (m) Change (m)
30-Jun-16 51.74
2,068.2
0.0
30-Jun-16 14.79
591.3
0.0
30-Jun-16 5.31
212.5
8.6
30-Jun-16 5.00
199.9
0.0
30-Jun-16 1.68
67.2
3.0
30-Jun-16 1.28
51.2
-1.8
30-Jun-16 0.89
35.6
0.3
29-Feb-16 0.82
32.8
-0.2
30-Jun-16 0.73
29.1
2.3
30-Jun-16 0.72
28.6
-0.6

(in %)
Promoter
FII
DII
Others

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16

65.45 65.45 65.62 66.74 66.74
16.28 18.72 17.82 16.78 16.340
9.46
6.89
7.59
9.96 10.48
8.81
8.94
8.97
6.52
6.44

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
LIC Mutual Fund Asset Management Company Ltd.
ICICI Prudential Life Insurance Company Ltd.
ICICI Prudential Asset Management Co. Ltd.
Invesco Hong Kong Limited
Bessemer Trust Company, N.A. (US)

Value
+46.59M
+16.46M
+12.38M
+6.97M
+4.92M

Shares
+8.57M
+3.03M
+2.28M
+1.32M
+0.90M

Sells
Investor name
Aberdeen Asset Management (Asia) Ltd.
MFS Investment Management
HDFC Asset Management Co., Ltd.
Dodge & Cox
BlackRock Institutional Trust Company, N.A.

Value
-17.68M
-13.63M
-14.87M
-9.89M
-5.40M

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

Shares
-3.38M
-3.19M
-2.84M
-1.82M
-0.99M

Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Employee Expenses
Marketing Expenses
Access Charges
Network Operating
License Fee
Other Costs
Other expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
Exceptional Items
PBT
MI / Profit from associates
Total Tax
PAT
Growth (%)
EPS (|)

| Crore
FY15
92,135.1
7.3
4,712.3
15,553.3
11,275.9
20,394.4
8,746.9
129.0
60,811.8
31,323.3
12.8
15,531.1
5,005.5
0.0
796.0
9,990.7
-597.5
5,404.7
5,183.5
86.9
13.0

FY16E
96,619.3
4.9
4,911.2
15,998.7
10,942.3
21,166.8
9,492.7
14.2
62,525.9
34,093.4
8.8
17,449.8
6,988.9
0.0
(1,450.5)
11,105.2
-315.9
5,936.8
5,484.3
5.8
13.7

FY17E
102,621.0
6.2
4,349.1
15,728.9
10,555.5
23,563.1
10,245.5
0.0
(125.8)
64,316.3
38,304.7
12.4
19,190.1
7,711.3
0.0
353.6
11,049.6
-577.7
5,936.2
5,691.1
3.8
14.2

FY18E
112,116.6
9.3
4,592.6
17,068.6
10,911.7
26,092.7
11,075.7
0.0
87.5
69,828.8
42,287.8
10.4
20,965.8
7,059.9
0.0
14,262.0
-265.6
6,477.4
8,050.2
41.5
20.1

Cash flow statement

(Year-end March)
Profit after Tax
Add: Depreciation
Add: Interest Paid
(Inc)/dec in Current Assets
Inc/(dec) in CL and Provisions
Others
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Interest Paid
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash

| Crore
FY15
5,183.5
15,531.1
5,005.5
(5,131.2)
6,403.5
0.0
26,992.4
-1,373.7
-25,060.6
-1,166.5
-27,600.8
0.0
-9,528.6
-1,800.6
5,005.5
3,123.2
-3,200.5
-3,809.0
4,980.8
1,171.8

FY16E
5,484.3
17,449.8
6,988.9
150.3
5,218.2
0.0
35,291.4
4,442.7
-49,032.1
6,275.2
-38,314.2
0.0
-5,466.6
-636.1
6,988.9
4,673.4
5,559.7
2,536.9
1,171.8
3,708.7

FY17E
5,691.1
19,190.1
7,711.3
1,028.7
-1,662.6
0.0
31,958.7
-700.0
-20,000.0
488.3
-20,211.7
0.0
-5,000.0
-2,104.6
7,711.3
-15,422.7
-14,816.0
-3,069.0
3,708.7
639.7

FY18E
8,050.2
20,965.8
7,059.9
(880.4)
4,243.5
0.0
39,439.1
-500.0
-20,000.0
206.5
-20,293.5
0.0
-9,000.0
-2,104.6
7,059.9
-14,119.9
-18,164.6
981.0
639.7
1,620.7

FY15

FY16E

FY17E

FY18E

13.0
51.8
155.0
4.5
2.9

13.7
57.4
164.2
1.6
9.3

14.2
62.2
173.2
5.3
1.6

20.1
72.6
188.0
5.3
4.1

34.0
17.1
6.5
0.5
26.6
134.6

35.3
17.2
4.2
0.6
27.6
146.4

37.3
18.6
5.9
0.6
25.0
130.0

37.7
19.0
7.2
0.6
24.0
130.0

9.7
10.3
11.8

6.1
9.4
10.3

8.7
10.8
11.7

10.7
12.3
13.4

28.8
7.0
2.4
1.6
2.4

27.3
7.0
2.5
1.5
2.3

26.3
6.2
2.3
1.5
2.2

18.6
5.3
2.0
1.3
2.0

2.6
1.3
0.4
0.4

2.8
1.4
0.3
0.3

2.4
1.3
0.3
0.3

1.9
1.1
0.3
0.3

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet

| Crore

(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Others
Total Liabilities

FY15

FY16E

FY17E

FY18E

1,998.7
59,957.7
61,956.4
80,683.9
1,511.0
9,325.9
153,477.2

1,998.7
63,631.4
65,630.1
95,043.0
1,435.6
15,235.7
177,344.4

1,998.7
67,217.8
69,216.5
90,043.0
1,435.6
15,724.0
176,419.2

1,998.7
73,163.5
75,162.2
81,043.0
1,435.6
15,930.5
173,571.3

Assets
Gross Block
Less: Acc Depreciation
Net Block
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Other Current Liabilities
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds

241,705.9
91,561.9
150,144.0
18,637.5
133.9
6,725.2
3,182.8
6,267.7
1,171.8
17,481.4
33,967.0
206.1
8,131.5
42,304.6
-24,823.1
9,518.8
153,477.2

290,738.0
109,011.7
181,726.3
14,194.9
169.2
7,310.6
4,883.2
3,796.4
3,708.7
19,868.1
38,745.6
232.6
8,544.6
47,522.8
-27,654.7
9,078.0
177,344.4

310,738.0
128,201.9
182,536.2
14,894.9
179.7
7,028.8
3,889.9
4,032.2
639.7
15,770.3
36,549.9
234.9
9,075.4
45,860.2
-30,089.9
9,078.0
176,419.2

330,738.0
149,167.7
181,570.4
15,394.9
196.3
7,372.1
4,037.3
4,405.3
1,620.7
17,631.7
39,931.9
256.6
9,915.1
50,103.7
-32,472.0
9,078.0
173,571.3

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios
EBITDA Margin (%)
EBIT Margin (%)
PAT Margin (%)
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio

Source: Company, ICICIdirect.com Research

Page 10

ICICIdirect.com coverage universe (Telecom)

EPS (|)
CMP
M Cap
Sector / Company
(|) TP(|) Rating
(| Cr) FY16 FY17E FY18E
372 435 Buy 148,703 13.7
14.2 20.1
Bharti Airtel (BHATE)
400 500 Buy 75,868 12.6
13.9 15.7
Bharti Infratel (BHAINF)
105 130 Buy 37,804
8.6
4.1
5.8
Idea Cellular (IDECEL)
445 543 Buy 12,683 -49.0
14.4 21.0
Tata Comm. (TATCOM)
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

P/E (x)
EV/EBITDA (x)
RoCE (%)
RoE (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
27.1
26.1 18.5
7.0
6.1
5.3
9.4
10.8
12.3
6.1
8.7
10.7
31.9
28.9 25.5 13.5 12.2 10.9 17.5
19.4
22.1 13.0
14.6
16.8
12.3
25.8 18.1
5.8
5.2
4.6
9.4
8.7
9.8 12.0
5.4
7.2
NM
30.8 21.2
8.4
7.2
5.9
5.1
7.4
9.5
NA
NA 161.5

Page 11

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 12

ANALYST CERTIFICATION
We /I, Bhupendra Tiwary MBA, Sneha Agarwal, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

Terms & conditions and other disclosures:

ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia,
engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has its various
subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of which are
available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Bhupendra Tiwary MBA, Sneha Agarwal, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding
twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Bhupendra Tiwary MBA, MBA Sneha Agarwal, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

Page 13