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RESULTS REVIEW 4QFY19 07 MAY 2019

Bharti Airtel BUY

Recovery finally, sustainability key!Bharti Airtel’s 4QFY19 results were ahead of estimates. India revenue growth of 1.3% QoQ (wireless 4.3%) despite two days less and estimated EBITDA growth of ~9.8% were key positives. Bharti reported meaningful revenue/EBITDA growth in India business nearly after ten quarters (albeit Jio launch). Sustainability of this is key catalyst. Reiterate BUY with SoTP of Rs 374 (India Wireless @ 10x and Africa at 7.5x FY21E EBITDA). HIGHLIGHTS OF THE QUARTER Bharti’s consolidated revenue was at Rs 206bn (+1.8%

QoQ) and EBITDA at Rs 66.3bn (+6.7% QoQ). General expenses declined by 8.4% QoQ (~Rs 2bn). A significant portion of this (~Rs 1.5bn) we believe is due to excess provision reversals. Adjusted EBITDA growth would be ~4.3% QoQ, yet healthy. Note: Due to regulatory reasons, Bharti hasn’t provided segment wise operating details and these limit inferences. Since depreciation is flat QoQ, we assume it to be similar across segment for 4QFY19 EBITDA calculation (EBIT + D&A).

India business revenue grew by 1.3% QoQ. EBITDA grew by healthy ~9.8% (adj. for excess provision reversals ~6.4%, yet healthy. EBITDA margin stood at 32.2% (+145bps QoQ). ~30-40bps is due to accounting change in Africa of revenue from contract with customers. From 1QFY20, EBITDA margin would

improve significantly due to adoption of IndAS 116 on ‘lease accounting’. However, this should be offset by higher depreciation and interest costs.

India wireless revenue grew by 4.3% QoQ and EBITDA by ~28% (adj ~20%) to ~Rs 25bn. These we believe is owing to minimum recharge plans, pick up in 4G data subscribers offsetting downgrades.

Despite TRAI tariff order led turbulence, DTH business revenue grew by 1.7% QoQ and EBITDA ~7.4%. Other business segments (enterprise, home broadband and passive infra) performance was muted.

In a seasonally weak quarter, Africa revenue/EBITDA was down by ~2% QoQ.

Near term outlook: Competitive intensity though high, substantial pain is behind. Positive news flow of Infratel stake sale and Africa IPO are likely.

STANCE We believe Bharti is moving in the right direction with aggressive 4G rollouts, partnerships, balance sheet strengthening etc. Bharti’s cash war chest is likely to increase by ~Rs 500-550bn in FY20. This should provide it ammunition to combat competition. Persistent cash burn may compel Jio to relook its aggressive pricing stance. This is key trigger and likely.

Consolidated Financial Summary (Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY17 FY18 FY19 FY20E FY21E Net Sales 202.3 203.2 (0.4) 204.2 (0.9) 954.7 826.4 807.8 849.7 902.4 EBITDA 62.2 74.7 (16.7) 62.4 (0.4) 353.3 300.8 258.2 280.7 321.0 APAT 0.9 3.1 (71.8) 1.2 (27.5) 38.0 11.0 4.1 (17.7) 3.4 Diluted EPS (Rs) 0.2 0.8 (71.8) 0.3 (27.5) 9.5 2.7 1.0 (3.5) 0.7 P/E (x) 35.1 121.3 325.6 NA 506.8 EV / EBITDA (x) 8.0 9.2 11.0 9.3 8.1 RoE (%) 16.3 15.7 16.1 17.6 17.9 Source: Company, HDFC sec Inst Research

INDUSTRY TELECOM CMP (as on 07 May 2019) Rs 325 Target Price Rs 374 Nifty 11,498

Sensex 38,277

KEY STOCK DATA

Bloomberg BHARTI IN

No. of Shares (mn) 3,997

MCap (Rs bn) / ($ mn) 1,299/18,730

6m avg traded value (Rs mn) 2,598

STOCK PERFORMANCE (%)

52 Week high / low Rs 380/254

3M 6M 12M

Absolute (%) 13.7 15.6 (11.1)

Relative (%) 10.2 6.9 (19.8)

SHAREHOLDING PATTERN (%)

Dec-18 Mar-19

Promoters 67.1 67.1

FIs & Local MFs 13.9 13.3

FPIs 17.1 17.6

Public & Others 1.9 2.0

Pledged Shares* - -

Source : BSE, * % of total

Himanshu Shah himanshu.shah@hdfcsec.com +91-22-6171-7315

BHARTI AIRTEL : RESULTS REVIEW 4QFY19

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Quarterly Financial Snapshot: Consolidated Rs Bn 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 % chg YoY % chg QoQ Total revenues 193.9 200.8 204.2 202.3 206.0 6.2 1.8 IUC costs 20.3 21.4 23.3 24.5 24.4 20.3 -0.2 Net revenue 173.7 179.4 180.9 177.8 181.6 4.6 2.1 License fees 17.5 17.0 17.7 17.5 17.3 -1.1 -1.0 Network costs 48.1 50.7 56.1 57.5 59.6 24.0 3.6 Employee costs 9.9 9.7 9.4 9.5 9.4 -5.2 -1.1 SG&A 28.9 34.9 35.4 31.1 29.0 0.3 -7.0 Total Opex (ex IUC) 104.4 112.2 118.5 115.7 115.3 10.5 -0.3 EBITDA 69.3 67.3 62.4 62.2 66.3 -4.3 6.7 D&A 49.0 51.5 52.4 54.7 54.9 12.1 0.4 EBIT 20.3 15.8 10.1 7.5 11.4 -44.0 52.6 Finance cost (net) 18.3 21.3 29.9 19.4 25.3 38.4 30.2 Share in JVs/Asso. 1.8 1.7 1.6 (0.1) 0.4 -80.0 -475.5 Other (inc)/exp 2.6 2.7 2.3 0.6 0.9 -64.7 58.4 PBT 4.4 (2.8) (18.5) (12.1) (13.1) -396.3 7.8 Tax expense (3.0) (11.3) (22.5) (1.8) 1.4 -145.5 -175.3 EO exp/(inc) 3.2 3.6 1.4 (14.1) (20.2) -722.8 43.0 PAT (after EO items) 4.2 4.8 2.5 3.8 5.8 37.5 50.6 Minority Interests 3.4 3.8 1.3 3.0 4.7 39.5 58.2 Net Income 0.8 1.0 1.2 0.9 1.1 29.4 24.4 Source: Company, HDFC sec Inst Research Margin Analysis (%)

4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 chg YoY (bps) chgQoQ (bps) IUC costs 10.5 10.6 11.4 12.1 11.8 139 -24 License fees 9.0 8.5 8.7 8.6 8.4 -62 -24 Network costs 24.8 25.2 27.5 28.4 28.9 415 50 Employee costs 5.1 4.8 4.6 4.7 4.6 -55 -13 SG&A 14.9 17.4 17.3 15.4 14.1 -83 -133 Total Opex (ex IUC) 53.8 55.9 58.0 57.2 56.0 216 -121 EBITDA 35.7 33.5 30.6 30.7 32.2 -354 145 D&A 25.3 25.6 25.6 27.0 26.7 140 -38 EBIT 10.5 7.9 4.9 3.7 5.5 -495 184 Finance costs 9.4 10.6 14.6 9.6 12.3 286 268 Profit before Tax 2.3 (1.4) (9.1) (6.0) (6.4) -863 -35 Net Income 0.4 0.5 0.6 0.4 0.5 9 9 Source: Company, HDFC sec Inst Research

Decline in access costs QoQ is positive Network costs continues to rise as Bharti increases its capacity for 4G with additional BTS Lower SG&A costs QoQ is owing to excess provision reversal in our view Higher finance costs QoQ as 3QFY19 included derivatives and exchange gain Exceptional gain includes reversal of regulatory levies on favourable judgement

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Segment-wise Financial Performance Revenues (Rs Bn) 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19P % chg YoY % chgQoQ Mobile 107.5 103.5 104.8 102.5 101.9 106.3 2.7 4.3 Home 6.2 6.0 5.7 5.6 5.5 5.5 -8.4 0.6 Digital 9.6 9.6 9.9 10.2 10.3 10.5 9.6 1.7 Business 29.1 28.3 29.9 33.5 31.1 30.0 6.2 -3.5 Towers 16.9 16.7 16.9 17.2 17.3 16.7 -0.2 -3.6 Others 1.0 1.0 0.4 0.5 0.2 0.0 -96.3 -83.5 India 170.4 165.2 167.7 169.6 166.4 169.1 2.4 1.7 South Asia 1.0 1.0 1.1 1.1 1.1 1.0 0.0 -8.6 Africa 51.3 47.3 52.8 56.5 56.2 55.1 16.5 -1.8 (-) Intersegment (18.5) (18.6) (19.8) (21.8) (20.2) (18.2) -1.7 -9.9 Total 203.2 193.9 200.8 204.2 202.3 206.0 6.2 1.8

EBITDA (Rs Bn) 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19P % chg YoY % chgQoQ Mobile 35.1 29.4 27.6 21.5 19.5 25.0 -15.2 28.0 Home 3.1 3.0 2.9 2.9 2.6 2.3 -22.2 -9.6 Digital 3.7 3.7 4.0 4.0 3.8 4.1 11.1 7.4 Business 11.7 11.5 10.4 10.8 9.9 8.8 -23.0 -10.6 Towers 8.3 11.4 7.8 8.0 10.7 10.5 -8.0 -1.6 Others (1.8) (1.7) (1.2) (1.5) (2.3) (2.2) 30.0 -1.6 India 60.1 57.3 51.5 45.6 44.2 48.5 -15.4 9.8 South Asia 0.0 0.1 0.0 0.0 0.0 0.1 3.8 66.1 Africa 18.2 17.9 19.2 20.9 21.9 21.4 20.0 -2.0 (-) Intersegment (3.6) (5.9) (3.5) (4.2) (3.9) (3.7) -38.1 -6.1 Total 74.7 69.3 67.3 62.4 62.2 66.3 -4.3 6.7

Margin % 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19P chg YoY (bps) chgQoQ (bps) Mobile 32.6 28.4 26.3 20.9 19.1 23.5 -496 433 Home 49.9 49.7 49.8 52.3 46.9 49.7 -1 273 Digital 38.5 38.6 40.4 38.7 37.0 38.7 9 167 Business 40.1 40.5 34.8 32.2 31.7 32.9 -764 118 Towers 49.1 68.3 46.1 46.3 61.7 50.9 -1742 -1081 India 35.3 34.7 30.7 26.9 26.6 28.7 -602 212 South Asia 1.8 6.5 0.9 2.7 3.7 6.7 25 302 Africa 35.4 37.8 36.4 37.1 38.9 38.9 112 -7 Blended 36.8 35.7 33.5 30.6 30.7 32.2 -354 145 Source: Company, HDFC sec Inst Research

Meaningful revenue growth QoQ after a hiatus of ten quarters Segment-wise EBITDA for 4QFY19 is computed as EBIT plus Depreciation. Depreciation we have assumed same as last quarter

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Operating KPIs

2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 chg YoY chgQoQ India Wireless KPIs Customer Base ('000s) 282,047 290,113 304,192 344,564 332,764 284,224 -2.0 -14.6 Net Additions ('000s) 1,400 8,066 14,079 40,372 (11,800) (48,539) NA NA Monthly Churn (%) 3.9 3.3 2.8 2.0 4.1 7.3 NA NA ARPU (Rs/month) 145 123 116 105 100 104 -15.5 4.1 MOU (min/month) 518 575 670 700 686 726 26.3 5.8 Minutes on network (mn mins) 437,142 494,546 592,657 684,191 693,061 702,881 42.1 1.4 Data KPIs Data subs ('000s) 65,769 70,836 86,077 94,783 97,666 107,511 48.5 3.0 - Mobile Broadband subs 28,306 36,367 47,862 58,281 65,731 77,068 132.2 12.8 As % of customer base 23.3 24.4 28.3 27.5 29.4 37.8 Total MBs on the network (mn MBs) 783,809 1,105,839 1,539,746 2,150,645 2,660,297 3,216,897 190.9 20.9 Usage per customer (MBs/month) 4,087 5,349 6,585 7,864 9,221 10,528 96.8 14.2 DTH Digital TV Customers ('000s) 13,521 13,937 14,168 14,646 14,779 15,001 7.6 1.5 Net additions 207 416 230 479 133 222 -46.6 67.5 Average Revenue Per User (ARPU) 233 233 228 229 232 231 -1.0 -0.3 Monthly Churn 1.36% 1.23% 1.10% 0.72% 1.34% 1.31% 8 bps -3 bps Africa Customer Base ('000s) 78,742 84,130 89,262 91,193 94,096 97,922 16.4 4.1 Net Additions 1,881 5,388 5,133 1,930 2,903 3,827 -29.0 31.8 Monthly Churn (%) 4.7% 4.1% 4.1% 4.9% 4.8% 4.7% 12.8 -3.3 ARPU (US$/month) 3.2 3.2 3.0 2.9 3.0 3.0 -5.6 0.4 MOU (min/month) 164 172 172 183 189 183 6.2 -2.9 Minutes on network (mn mins) 38,406 41,928 44,688 49,666 52,357 52,445 25.1 0.2 Source: Company, HDFC sec Inst Research

In absence of information, we haven’t included 4QFY19 KPIs

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Key Assumptions

FY13 FY14 FY15 FY16 FY17 FY18 FY19P FY20E FY21E India Wireless Subs (Mn) 188.2 205.5 226.0 251.2 273.6 304.2 280.8 296.8 331.8 Net Adds (Mn) 6.9 17.3 20.5 25.2 22.4 30.5 (23.4) 16.0 35.0 Implied ARPU (Rs)* 194.3 197.6 200.7 195.8 179.6 133.4 118.4 126.9 124.8 Revenue (Rs Bn) 430.7 466.8 519.6 560.8 565.5 462.6 415.5 439.7 470.6 Incremental Rev (Rs Bn) 43.4 36.1 52.8 41.1 4.8 (102.9) (47.1) 24.1 30.9 EBITDA (Rs Bn) 129.6 157.6 194.7 219.2 227.7 150.9 93.5 113.1 142.8 Incremental EBITDA (Rs Bn) (7.1) 28.0 37.2 24.5 8.5 (76.8) (57.4) 19.6 29.7 EBITDA Margin () 30.1 33.8 37.5 39.1 40.3 32.6 22.5 25.7 30.3

Africa Subs (Mn) 63.7 69.4 76.3 74.7 80.1 89.3 98.9 105.6 110.6 Net Adds (Mn) 10.6 5.7 6.8 (1.6) 5.4 9.2 9.6 6.8 4.9 Implied ARPU (Rs) 342.9 341.1 307.8 277.5 236.5 196.0 195.4 187.7 191.6 Revenue (Rs Bn) 240.4 272.5 269.1 251.3 219.6 199.2 220.6 230.2 248.5 Incremental Rev (Rs Bn) 42.2 32.1 (3.4) (17.7) (31.8) (20.4) 21.4 9.7 18.3 EBITDA (Rs Bn) 63.1 71.3 61.1 52.9 52.3 66.4 83.4 94.1 105.6 Incremental EBITDA (Rs Bn) 10.4 8.1 (10.2) (8.2) (0.6) 14.1 17.1 10.7 11.5 EBITDA Margin () 26.3 26.2 22.7 21.0 23.8 33.3 37.8 40.9 42.5

Consolidated Revenue (Rs Bn) India Wireless 431 467 520 561 566 463 416 440 471 Home Broadband 36 39 44 25 28 25 22 21 21 Digital 16 21 25 29 34 38 41 46 51 Enterprise 53 63 67 97 109 114 125 126 128 Passive Infra 50 51 54 56 61 66 68 69 70 Others 3 3 3 3 4 4 1 1 1 India Business 589 645 713 771 801 709 673 703 742 South Asia 12 17 16 16 12 4 4 4 5 Africa 240 273 269 251 220 199 221 230 249 Gross revenues 842 934 998 1,039 1,033 913 898 938 995 (-) Intersegment (60) (58) (62) (57) (66) (74) (80) (88) (93) Net revenues 782 876 936 982 966 839 818 850 902 Intersegment as of gross 7.1 6.2 6.2 5.5 6.4 8.1 8.9 9.4 9.3

Tariff hike and consequent revival in revenue growth is the key re-rating trigger

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FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E Consolidated EBITDA (Rs Bn) India Wireless 130 158 195 219 228 151 94 113 143 Home Broadband 15 15 18 11 13 12 11 10 10 Digital 0 3 7 10 12 14 16 17 20 Enterprise 9 14 14 30 34 42 40 41 42 Passive Infra 23 23 26 26 29 36 37 30 29 Others (2) (2) (1) (2) (4) (5) (7) (8) (9) India Business 174 210 258 295 312 250 190 204 235 South Asia 0 0 (0) (1) 0 0 0 0 0 Wireless - Africa 63 71 61 53 52 66 83 94 106 Gross EBITDA 237 281 319 347 365 316 273 298 340 (-) Intersegment (5) (4) (8) (7) (11) (15) (15) (17) (19) Net EBITDA 233 278 312 340 353 301 258 281 321

EBITDA Margin India Wireless 30.1 33.8 37.5 39.1 40.3 32.6 22.5 25.7 30.3 Home Broadband 41.1 37.5 40.7 42.5 47.2 46.7 47.8 49.2 49.2 Enterprise 2.8 16.1 27.3 34.2 35.6 37.9 38.8 38.1 38.1 Passive Infra 16.6 21.8 20.9 31.3 31.0 37.4 32.0 32.4 32.4 DTH 45.1 44.7 47.4 47.1 48.0 54.1 54.2 43.4 41.5 India Business 29.6 32.6 36.2 38.2 39.0 35.2 28.2 29.0 31.6 Wireless - Africa 26.3 26.2 22.7 21.0 23.8 33.3 37.8 40.9 42.5 Net EBITDA 29.7 31.7 33.3 34.6 36.6 35.9 31.6 33.0 35.6 Source: Company, HDFC sec Inst Research

Improvement in India Wireless EBITDA margin is premised on revenue growth and optically on account of abolition of 6p/min IUC wef 1st Jan, 2020

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Valuation Snapshot

Segments FY21E EBITDA (Rs Bn)

FY21E EBITDA/ Share (Rs)

Multiple (X)

Enterprise Value (Rs Bn)

Value Per Share (Rs)

India Wireless 143 36 10.0 1,428 278 Telemedia services 10 3 7.5 76 15 Enterprise 42 10 7.5 312 61 DTH 20 5 9.0 176 34 Wireless – Africa*** 106 26 7.5 555 108 Others* (9) (2) 10.0 (85) (17) Sub-total 311 78 7.9 2,461 479 Passive Infra** 269 52 Enterprise Value 2,729 532 (-) Net Debt 807 157 Target Price 1,922 374 * Others include South Asia, Corporate costs etc; ** Passive Infra business value is basis our Bharti Infratel (incl Indus) value of Rs 726bn @ TP of Rs 273 pro-rated for Bharti's 37% stake *** We have assumed Bharti’s stake and debt in Africa @ 70% Change in estimates

Old New Change

FY20E FY21E FY20E FY21E FY20E FY21E Revenue 862.0 923.8 849.7 902.4 (1.4) (2.3) EBITDA 272.6 317.1 280.7 321.0 3.0 1.2 EBITDA margin 31.6 34.3 33.0 35.6 140 bps 124 bps APAT (33.4) (5.7) (21.1) (0.0) (36.8) (99.1) Source: HDFC sec Inst Research

Peer Set Comparison

Company Mcap (Rs bn)

CMP (Rs)

TP (Rs)

Rating (Rs)

EV/EBITDA (X) P/E (X) ROE (%) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

Bharti Airtel 1,229 325 374 BUY 10.8 9.3 7.4 NA NA NA NA NA NA Idea Cellular 448 15.6 20 BUY 46.8 15.1 9.5 NA NA NA NA NA NA Bharti Infratel 496 267 273 NEU 7.9 8.3 8.0 19.5 19.4 18.9 16.1 17.6 17.9 Source: HDFC sec Inst Research

Reduction in our FY20-21E revenue estimate is owing to change in revenue accounting of Africa for contracts with customers Increase in EBITDA is to factor healthy 4QFY19 performance

BHARTI AIRTEL : RESULTS REVIEW 4QFY19

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Consolidated Income Statement (Rs bn) FY17 FY18 FY19P FY20E FY21E Total revenues 954.7 826.4 807.8 849.7 902.4 Access charges 102.8 90.4 93.5 93.4 69.9 Net revenue 851.9 735.9 714.3 756.3 832.5 License fees 92.8 75.6 69.4 73.2 80.2 Network costs 209.2 197.5 223.9 240.2 260.6 Employee costs 43.0 39.8 38.0 41.1 44.1 SG&A 153.7 122.3 124.8 121.1 126.7 Total Opex 498.6 435.2 456.1 475.6 511.5 EBITDA 353.3 300.8 258.2 280.7 321.0 EBITDA / Total revenues 37.0 36.4 32.0 33.0 35.6 D&A 197.7 192.4 213.5 208.0 217.5 EBIT 155.6 108.4 44.7 72.8 103.4 Finance cost (net) 77.0 80.7 95.9 76.6 72.2 JV / Associates gain/(loss) 10.4 10.6 3.6 0.7 0.5 Other income 1.2 2.5 2.9 2.4 2.4 Non-operating income / expenses, (net) (1.3) (0.1) (1.9) - -

Profit before Tax 88.9 40.6 (46.6) (0.8) 34.1 Income tax expense 34.8 10.8 (34.2) (0.3) 11.9 Exceptional Items (net of tax) 11.7 7.9 (29.3) - - Profit after tax (after exceptional items) 42.4 21.8 16.9 (0.5) 22.2

Non Controlling Interest 4.4 10.8 12.8 17.2 18.8 Net income 38.0 11.0 4.1 (17.7) 3.4

Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs bn) FY17 FY18 FY19P FY20E FY21E SOURCES OF FUNDS Equity Capital 20.0 20.0 20.0 25.7 25.7 Reserves & Surplus 654.6 675.4 694.2 926.5 929.9 Shareholders Fund 674.6 695.3 714.2 952.2 955.5 Minority Interest 68.8 88.1 135.3 152.5 171.3 ST Borrowings 246.1 345.1 394.6 382.6 358.8 LT Borrowings 899.1 854.8 873.3 671.5 632.2 Total Loans 1,145.2 1,200.0 1,267.9 1,054.0 991.0 Other non-current liabilities 55.6 85.1 98.7 111.7 126.8 Total Liabilities 1,944.2 2,068.6 2,216.0 2,270.3 2,244.6 APPLICATION OF FUNDS Property, Plant and Equipments 644.0 758.2 903.7 929.3 948.4 Net intangible assets 1,246.7 1,211.3 1,201.0 1,183.9 1,168.9 Investment in JV/Associates 82.3 86.8 88.9 92.5 96.3 Other non-current assets 151.3 114.5 229.3 240.5 253.9 Non-current assets 2,124.4 2,170.8 2,422.9 2,446.3 2,467.5 Trade and receivables 49.8 58.8 43.0 43.5 49.1 Other current assets 120.2 140.5 158.8 171.0 158.5 Current assets 170.1 199.3 201.8 214.4 207.6 Deferred revenue 48.8 48.7 44.0 47.6 51.5 Trade & other payables 268.5 277.7 280.0 258.3 238.2 Other current liabilities 66.0 110.9 212.0 229.1 247.6 Current Liabilities 383.3 437.3 536.0 535.0 537.4 Net Current Assets (213.3) (238.0) (334.2) (320.5) (329.9) C&CE 33.1 135.7 127.3 144.6 106.9 Total Assets 1,944.2 2,068.6 2,216.0 2,270.3 2,244.6

Source: Company, HDFC sec Inst Research

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Consolidated Cash Flow Year ending March (Rs bn) FY17 FY18 FY19E FY20E FY21E Reported PAT 42.4 21.8 16.9 (0.5) 22.2 Depreciation 197.7 192.4 213.5 208.0 217.5 Interest 77.0 80.7 95.9 76.6 72.2 Working Capital Change (98.1) 24.7 96.3 (13.7) 9.3 OPERATING CASH FLOW ( a ) 219.0 319.6 422.5 270.4 321.2 Capex (308.5) (271.2) (348.6) (216.5) (221.6) Free Cash Flow (89.5) 48.4 73.9 53.9 99.6 Investments & Others 15.5 61.8 (103.4) (1.8) (2.1) INVESTING CASH FLOW ( b ) (293.0) (209.4) (452.0) (218.3) (223.7) Capital Issuance (17.0) 44.1 61.2 255.7 0.0 Debt Issuance 138.7 54.8 67.9 (213.8) (63.0) Interest (77.0) (80.7) (95.9) (76.6) (72.2) Dividend & others (4.8) (25.7) (12.1) - - FINANCING CASH FLOW ( c ) 40.0 (7.6) 21.1 (34.7) (135.2) NET CASH FLOW (a+b+c) (34.0) 102.6 (8.4) 17.3 (37.7) Opening C&CE 67.1 33.1 135.7 127.3 144.6 Closing C&CE 33.1 135.7 127.3 144.6 106.9

Source: Company, HDFC sec Inst Research

Key Ratios FY17 FY18 FY19E FY20E FY21E PROFITABILITY () EBITDA Margin 37.0 36.4 32.0 33.0 35.6 EBIT Margin 16.3 13.1 5.5 8.6 11.5 APAT Margin 4.0 1.3 0.5 (2.1) 0.4 RoE 5.7 1.6 0.6 (2.1) 0.4 RoIC (or Core RoCE) 5.2 4.1 0.6 2.2 3.2 RoCE 5.1 4.0 0.6 2.1 3.0 EFFICIENCY Tax Rate () 39.2 26.7 73.4 35.0 35.0 Fixed Asset Turnover (x) 0.5 0.4 0.4 0.4 0.4 CA (days) 65 88 91 92 84 CL (days) 147 193 242 230 217 Cash Conversion Cycle (days) (82) (105) (151) (138) (133) Net D/EBITDA (x) 3.15 3.54 4.42 3.24 2.75 Net D/E (x) 1.65 1.53 1.60 0.96 0.93 Interest Coverage (x) 2.0 1.3 0.5 0.9 1.4 PER SHARE DATA (Rs) EPS 9.5 2.7 1.0 (3.5) 0.7 CEPS 59.0 50.9 54.4 37.1 43.0 Dividend 1.0 5.3 2.5 - - Book Value 168.8 173.9 178.7 185.5 186.1 VALUATION P/E (x) 35.1 121.3 325.6 NA 506.8 P/BV (x) 2.0 1.9 1.9 1.8 1.8 EV/EBITDA (x) 8.0 9.2 11.0 9.3 8.1 EV/Revenues (x) 3.0 3.4 3.5 3.1 2.9 OCF/EV (%) 7.8 11.5 14.8 10.3 12.4 FCF/EV (%) (3.2) 1.7 2.6 2.1 3.8 FCFE/Mkt Cap (%) (9.7) (1.9) (1.3) (1.3) 1.6 Dividend Yield (%) 0.3 1.6 0.7 - -

Source: Company, HDFC sec Inst Research

BHARTI AIRTEL : RESULTS REVIEW 4QFY19

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Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP* Reco Target* 6-Jul-18 334 BUY 424

29-Jul-18 336 BUY 419 9-Oct-18 272 BUY 378

27-Oct-18 274 BUY 313 9-Jan-19 288 BUY 365 1-Feb-19 287 BUY 372

10-Apr-19 324 BUY 378 7-May-19 325 BUY 374

* Adjusted for rights issue

RECOMMENDATION HISTORY

200

250

300

350

400

450

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov-

18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Apr-

19

May

-19

Bharti Airtel TP

BHARTI AIRTEL : RESULTS REVIEW 4QFY19

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BHARTI AIRTEL : RESULTS REVIEW 4QFY19

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