Scrips of Bharti Airtel, Vodafone Idea rally despite record losses

Suresh P Iyengar Mumbai | Updated on November 15, 2019 Published on November 15, 2019

In a major surprise, shares of the two telecom majors Bharti Airtel and Vodafone Idea rallied sharply on Friday despite both companies posting a record cumulative loss of ₹70,000 crore.

Interestingly, broking firms have given a 'buy' call on both these stocks expecting a bailout package from the government.

Bharti Airtel on the BSE gained 8 per cent to ₹393 after hitting a high of ₹398 and low of ₹354 on Friday. The stock of Vodafone Idea Cellular shot up 25 per cent to ₹3.68 and hit a high of ₹3.89 and low of ₹2.61. The company, on Thursday, reported consolidated loss of ₹50,921 crore in the September quarter, the highest ever loss posted by any Indian corporate on account of the liability arising out of the Supreme Court order in the adjusted gross revenue (AGR) case.

Similarly, Sunil Mittal-led Bharti Airtel made a provision of ₹28,450 crore as the Supreme Court recently upheld the government’s position on including revenue from non-telecommunication businesses in calculating the annual AGR of telecom companies.

Now, a share of that revenue has to be paid as licence and spectrum fee to the exchequer. The company reported ₹23,045 crore loss for the September quarter on Thursday.

Motilal Oswal recommended a ‘buy’ on Bharti Airtel stating that the company has outperformed operationally by maintaining its 4G subscriber base and also revenue market share.

Even in the case of limited government relief, it may survive with a potential duopoly structure. The consequent strong growth potential could offset regulatory pressures, it said.

Recommending an upside of 16 per cent to ₹425, Motilal said rising EBITDA, deleveraging the balance sheet and improved free cash flow have protected the stock even during the adverse external scenario even while raising ffnds or paying penalties towards AGR case remains a concern.

Meanwhile, Ravinder Takkar, CEO, Vodafone Idea, in a conference call said the Supreme Court judgment on AGR would have significant implications on the telecom industry and that the company was in the process of filing a review petition.

The government was aware of the tremendous stress faced by telecom operators and was determined to see three private players and one public player in the telecom sector, he said.

The company is making a recommendation to the government through the Cellular Operators Association of India (COAI).

Published on November 15, 2019
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