Bharti Airtel - result update-Feb-13-EDELbreport.myiris.com/ES1/BHATELEE_20130201.pdf · iterated...

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Bharti Airtel’s (Bharti) Q3FY13 revenue rose 2.8% QoQ to INR202.4bn, in

line with Street estimate, while EBITDA margin, at 30.5%, declined 40bps

QoQ on higher network costs. PAT at INR2.8bn, was significantly lower

due to forex fluctuation impact of INR2.4bn and a one-time tax of

INR600mn. ARPU at INR185 grew 4.3% QoQ owing to reduction of

inactive customers while RPM at INR0.425 was flat QoQ. The company re-

iterated its stand on tariff hikes becoming imminent to offset rising input

costs. We remain positive, on the long-term, based on Bharti’s continued

investments in profitable services (data, 3G and 4G) and shifts in focus to

margins in Africa. We maintain ‘BUY’ with revised TP of INR397.

India- betting on data

Bharti reported a sequential decline in subscribers and voice RPM of ~4.0mn and 0.7%

respectively while voice minutes at 240.8bn were up 2.8%. Churn was down 260bps

QoQ to 5.9%. The management re-iterated its stand on reducing discounts with a view

to improve realizations. Further, it stated it would continue to make investments in

data (2G, 3G and 4G) to capture the growth seen in data demand. Bharti has a rising

trend of data users (22.8% of mobile subscribers currently) and data usage per

customer increased by 21% QoQ (19% in Q2FY13).

Africa- improving margin profile to be the focus

While Africa has seen an improved revenue trajectory, margins have stagnated in the

26%-27% range. The management being cognizant of this fact, stated it would shift

focus from gaining revenue market share to improving margins. This will be achieved

through increasing the proportion of data revenues as the customers in Africa have a

higher propensity for data than voice. Hence its incremental capex in Africa will be to

develop its 3G network.

Outlook and valuations: Positive; maintain `BUY’

We continue to believe data usage (in India and Africa) will increase in future, thus

providing impetus to growth and tariff hikes (through reduced promotions) will

increase going forward, thus offsetting the increasing input costs. We have cut our

FY13E/14E EPS estimate by 43%/11% to INR6.8/INR18.7 to factor in the increased costs

and lower 9MFY13 performance. At 5.9x FY14 EV/EBITDA, even adjusting for the

regulatory charges, we see an upside of 21% in the stock. We maintain ‘BUY/ SO’

RESULT UPDATE

BHARTI AIRTEL In the right direction

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Outperformer

Risk Rating Relative to Sector Low

Sector Relative to Market Equalweight

MARKET DATA (R: BRTI.BO, B: BHARTI IN)

CMP : INR 329

Target Price : INR 397

52-week range (INR) : 401 / 216

Share in issue (mn) : 3,797.5

M cap (INR bn/USD mn) : 1,251 / 23,507

Avg. Daily Vol.BSE/NSE(‘000) : 5,652.5

SHARE HOLDING PATTERN (%)

Current Q2FY13 Q1FY13

Promoters *

68.5 68.5 68.5

MF's, FI's & BK’s 8.2 8.5 8.4

FII's 17.3 16.4 16.9

Others 6.0 6.6 6.2

* Promoters pledged shares

(% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty

EW Telecom

Index

1 month 2.3 0.8 2.2

3 months 17.2 6.3 (15.2)

12 months (8.8) 14.6 (24.0)

Sandip Agarwal

+91 22 6623 3474

[email protected]

Omkar Hadkar

+91 22 6620 3147

[email protected]

India Equity Research| Telecom

February 1, 2013

Financials (INR mn)

Year to March Q3FY13 Q3FY12 % change Q2FY13 % change FY12 FY13E FY14E

Revenues 202,395 184,767 9.5 196,871 2.8 714,508 805,760 894,910

EBITDA 61,697 59,273 4.1 60,910 1.3 236,573 248,999 302,408

Net profits 2,837 10,113 (71.9) 4,826 (41.2) 42,572 25,757 70,893

Dil. EPS (INR) 0.7 2.7 (71.9) 1.3 (41.2) 11.2 6.8 18.7

Diluted P/E (x) 29.4 48.6 17.6

EV/EBITDA (x) 8.2 7.6 5.9

ROAE (%) 8.6 5.0 12.7

Telecom

2 Edelweiss Securities Limited

Source: Edelweiss research

Table 1: Trend of KPIs

Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

India - mobile services

Mobility subscribers (mn) 152.5 162.2 169.2 172.8 175.7 181.3 187.3 185.9 181.9

Pre-paid customers (%) 96.2 96.3 96.3 96.3 96.3 96.3 96.2 96.0 95.8

Monthly Churn (%) 7.8 7.6 6.4 7.2 7.9 8.8 8.8 8.5 5.9

Traffic (mn min) 199,146 211,822 221,560 217,408 219,152 230,365 239,338 234,224 240,814

% change in above 4.4 6.4 4.6 (1.9) 0.8 5.1 3.9 (2.1) 2.8

Average revenue per user (INR) 198 194 190 183 187 189 185 177 185

% change in above (1.8) (2.3) (1.6) (4.0) 2.2 1.1 (2.2) (3.9) 4.3

Average minutes of use per user 449 449 445 423 419 431 433 417 435

% change in above (1.0) (0.1) (0.7) (5.0) (1.0) 2.8 0.4 (3.8) 4.4

Average realised rate (INR) 0.44 0.43 0.43 0.43 0.45 0.44 0.43 0.43 0.43

% change in above (0.6) (2.4) (0.9) 1.0 3.2 (1.7) (2.6) (0.2) (0.1)

Non Voice Rev. as a % of mobile rev. 13.8 15.0 14.6 14.5 14.3 16.2 16.3 16.8 17.3

Telemedia

Subscriber base (mn) 3.26 3.30 3.32 3.33 3.32 3.27 3.27 3.27 3.28

Net adds (mn) 0.04 0.04 0.03 0.01 (0.01) (0.05) 0.00 0.00 0.00

ARPU (INR) 934 934 952 955 916 933 962 971 973

% change in above (2.1) 0.0 2.0 0.3 (4.1) 1.9 3.1 0.9 0.3

Africa

Traffic (mn mins) 14,904 14,915 16,337 17,950 18,496 19,131 19,651 23,646 26,174

Subscribers (mn) 42.1 44.2 46.3 48.4 50.9 53.1 55.9 58.7 61.7

Net adds (mn) 2.0 2.1 2.1 2.1 2.5 2.2 2.7 2.8 3.0

Pre-paid subscribers (%) 99.3 99.3 99.3 99.3 99.3 99.3 99.3 99.3 99.3

Monthly churn (%) 5.9 6.2 6.3 6.1 5.4 5.3 5.1 5.1 5.1

MoU 120 115 121 128 125 122 120 138 144

% change in above 7.1 (4.0) 5.1 5.2 (2.5) (2.1) (1.2) 14.2 4.5

RPM (US¢) 6.1 6.2 6.0 5.7 5.7 5.6 5.4 4.6 4.3

% change in above (6.8) 1.4 (3.3) (4.2) (0.4) (2.0) (3.1) (14.6) (6.6)

ARPU (USD) 7.3 7.2 7.3 7.3 7.1 6.8 6.5 6.4 6.2

% change in above (0.4) (2.5) 1.6 0.2 (2.3) (4.1) (4.3) (2.4) (2.4)

Non-Voice revenue (%) 7.9 7.8 8.4 8.5 8.0 10.6 12.9 13.0 15.1

Total no. of sites 11,338 11,912 12,703 13,628 14,112 14,831 15,439 15,979 16,371

DTH

Digital TV Customers ('000) 4,932 5,663 6,262 6,614 7,069 7,228 7,400 7,455 7,894

Net additions ('000) 1,033 730 600 352 455 159 172 55 439

ARPU (INR) 160 161 163 161 160 166 166 177 186

Monthly Churn (%) 0.4 0.7 0.7 1.2 1.2 1.2 1.7 1.9 1.3

Districts Covered 505 531 550 582 587 609 616 632 632

Data

Data Customer Base ('000) 35,780 38,660 40,600 41,480

Net additions ('000) 2,880 1,940 880

Of which no. of 3G data customers ('000) 2,711 3,713 4,014 5,187

Net additions ('000) 1,002 301 1,173

As % of Mobile Customer Base 19.7 20.6 21.8 22.8

Total MBs on the network(Mn) 10,006 12,566 15,879 19,777

% change in above 25.6 26.4 24.5

Data Average Revenue Per User (ARPU) 44.0 40.0 43.0 47.2

% change in above (9.1) 7.5 9.8

Data Usage per customer (MBs) 107 112 133 161

% change in above 4.7 18.8 21.1

Data Realization per MB (INR) 0.409 0.353 0.324 0.293

% change in above (13.7) (8.2) (9.5)

Bharti Airtel


Table 2: Mobile services India and South Asia (INR mn)

Quarter Ended

Dec-12 Sep-12 % Chg Q-o-Q Dec-11 % Chg Y-o-Y

Total revenues* 109,364 105,309 3.9 101,764 7.5

EBITDA* 33,083 31,937 3.6 34,431 (3.9)

EBIT 16,713 18,438 (9.4) 20,176 (17.2)

EBITDA / Total revenues (%) 30.3 30.3 33.8

Source : Company

*excl. impact of exceptional item in Sep-12

Table 3: Telemedia services (INR mn)

Quarter Ended


Total revenues 9,566 9,529 0.4 9,128 4.8

EBITDA 4,165 4,039 3.1 3,542 17.6

EBIT 1,642 1,803 (8.9) 1,287 27.6

EBITDA / Total revenues 43.5 42.4 38.8

Source : Company

Table 4: Enterprise services (INR mn)

Quarter Ended


Total revenues 14,219 13,934 2.0 11,881 19.7

EBITDA 2,298 2,148 7.0 2,008 14.4

EBIT 888 770 15.4 713 24.6


Source : Company

Table 5: Passive Infrastructure services (INR mn)

Quarter Ended


Total revenues 26,350 25,567 3.1 24,393 8.0

EBITDA 9,761 9,577 1.9 9,110 7.1

EBIT 4,200 4,090 2.7 3,758 11.8


Source : Company

Table 6: Digital TV services (INR mn)

Quarter Ended


Total revenues 4,280 3,937 8.7 3,327 28.7

EBITDA 147 33 347.7 90 62.7

EBIT (1,828) (2,228) (17.9) (1,955) (6.5)


Source : Company

Quarter Ended

Quarter Ended

Particulars

Particulars

Particulars

Particulars

Particulars

Quarter Ended

Quarter Ended

Quarter Ended

Telecom


Table 7 Mobile Services Africa - Comprises of 17 country operations in Africa. (USD mn)

Quarter Ended


Total revenues 1,133 1,097 3.4 1,057 7.2

EBITDA 300 298 0.8 282 6.5

EBIT 80 80 0.2 58 37.6


Source : Company

Table 8: Others - includes corporate office (INR mn)

Quarter Ended


Total revenues 782 946 (17.4) 666 17.4

EBITDA (3,010) (2,249) 33.8 (3,139) (4.1)

EBIT (3,192) (2,336) 36.6 (3,243) (1.6)

Source : Company

ParticularsQuarter Ended

Quarter EndedParticulars

Bharti Airtel


Financial snapshot (INR mn)

Year to March Q3FY13 Q3FY12 % change Q2FY13* % change YTD13 FY13E FY14E

Net revenues 202,395 184,767 9.5 196,871 2.8 592,767 805,760 894,910

N/W, interconnect & LC costs 94,402 82,338 14.7 88,931 6.2 272,103 369,938 396,517

Employee expenses 10,211 8,505 20.1 9,846 3.7 29,250 39,900 40,271

Other operating expenses 36,085 34,651 4.1 37,184 (3.0) 110,438 146,923 155,714

Total expenditure 140,698 125,494 12.1 135,961 3.5 411,791 556,760 592,502

EBITDA 61,697 59,273 4.1 60,910 1.3 180,976 248,999 302,408

Depreciation 39,005 35,845 8.8 38,560 1.2 115,136 156,244 162,067

EBIT 22,692 23,428 (3.1) 22,350 1.5 65,840 92,756 140,341

Other income 142 240 (40.7) (850) (116.7) (590) 3,752 3,752

Interest 13,319 7,877 69.1 10,219 30.3 31,749 46,968 41,319

Profit before tax 9,515 15,806 (39.8) 11,281 (15.7) 33,425 49,540 102,775

Tax 6,675 5,585 19.5 6,652 0.3 18,205 23,845 32,374

Core profit 2,840 10,221 (72.2) 4,629 (38.6) 15,220 25,695 70,401

Minority interest 3 108 (97.2) (197) (101.5) (65) (62) (62)

Net profit 2,837 10,113 (71.9) 4,826 (41.2) 15,285 25,757 70,463

Diluted EPS (INR) 0.7 2.7 (71.9) 1.3 (41.2) 4.0 6.8 18.6

As % of net revenues

N/W, interconnect & LC costs 46.6 44.6 45.2 45.9 45.9 44.3

Employee cost 5.0 4.6 5.0 4.9 5.0 4.5

Other operating expenses 17.8 18.8 18.9 18.6 18.2 17.4

EBITDA 30.5 32.1 30.9 30.5 30.9 33.8

Reported net profit 1.4 5.5 2.5 2.6 3.2 7.9

*excl. impact of exceptional item

Change in Estimates FY13E FY14E

New Old % change New Old % change Comments

Net Revenue 805,760 804,548 0.2 894,910 877,395 2.0

EBITDA 248,999 256,848 (3.1) 302,408 302,785 (0.1) Higher cost assumptions leads to

lower operating profits

EBITDA Margin 30.9 31.9 33.8 34.5

Core profit 25,695 45,181 (43.0) 70,831 79,945 (11.3) Lower operating profits, forex loss

and on time tax cost along with

higher absolute tax in Q3 leads to

lower PAT inFY13

PAT Margin 3.2 5.6 7.9 9.1

Capex 150,000 150,000 0.0 150,000 150,000 0.0

Telecom


Company Description

Bharti is India’s largest integrated telecom operator providing mobile, broadband &

telephone (B&T) and enterprise services. It is India’s largest wireless operator with a pan-

India mobility network spanning all 22 telecom circles. It had a wireless subscriber base of

~181.9mn in Q3FY13, implying wireless subscriber market share of ~20%. The enterprise

services division provides carrier (long distance services) and other services to corporates.

Bharti offers 2G and 3G services as the fifth mobile operator in Sri Lanka. It recently

launched 4G services in Kolkata and Bangalore.

Investment Theme

The telecom sector is going through uncertain times as there are pressures on all counts

regulatory, operationally and financially. The TRAI recommendations on spectrum pricing

would lead to severe stress on the balance sheets of operators. On the operational front,

due to competitive intensity is lower, and distributor commissions are likely to go down.

Given the loans related to 3G spectrum funding and further requirements to pay for 2G

spectrum, the sector is going through financial challenges. Bharti has retaliated to regain

lost market share. We expect Bharti’s cash flows to improve from FY14 as capex moderates

and growth picks up. Since it has the best cash flows to tide over the crisis created by the

TRAI with its recent spectrum pricing recommendations, Bharti remains our top pick in the

sector.

Key Risks

If the government accepts the Telecom commission’s recommendation of charging for

entire spectrum upfront in FY13 instead of at the time of renewal then Bharti would see a

significant cash outflow. Also, if the INR continues to depreciate further then Bharti would

incur forex losses leading to earnings cut.


Bharti Airtel

Financial Statements

Income statement (INR mn)

Year to March FY12 FY13E FY14E FY15E

Net revenue 714,508 805,760 894,910 990,281

Direct costs 316,058 369,938 396,517 444,914

Employee costs 35,159 39,900 40,271 39,611

Other Expenses 126,718 146,923 155,714 175,280

Total operating expenses 477,935 556,760 592,502 659,805

EBITDA 236,573 248,999 302,408 330,477

Depreciation & Amortization 133,681 156,244 162,067 180,245

EBIT 102,892 92,756 140,341 150,232

Other income 3,053 3,752 4,381 2,791

Interest expenses 40,784 46,968 41,319 30,123

Profit before tax 65,161 49,540 103,403 122,899

Provision for tax 22,602 23,845 32,572 39,328

Net profit 42,559 25,695 70,831 83,572

Profit After Tax 42,559 25,695 70,831 83,572

Minority interest (13) (62) (62) (62)

Profit after minority interest 42,572 25,757 70,893 83,634

Basic EPS (INR) 11.2 6.8 18.7 22.0

Shares outstanding (mn) 3,798 3,798 3,798 3,798

Diluted EPS (INR) 11.2 6.8 18.7 22.0

Dividend per share (INR) 1.0 1.0 1.5 1.0

Dividend payout (%) 10.4 17.3 9.4 5.3

Common size metrics


Operating expenses 66.9 69.1 66.2 66.6

Depreciation 18.7 19.4 18.1 18.2

Interest expenditure 5.7 5.8 4.6 3.0

EBITDA margins 33.1 30.9 33.8 33.4

Net profit margins 6.0 3.2 7.9 8.4

Growth ratios (%)


Revenues 20.1 12.8 11.1 10.7

EBITDA 18.3 5.3 21.4 9.3

PBT (15.5) (24.0) 108.7 18.9

Net profit (30.0) (39.5) 175.7 18.0

EPS (30.0) (39.5) 175.2 18.0

Key Assumptions


Macro

GDP(Y-o-Y %) 6.5 5.5 6.5 7.0

Inflation (Avg) 8.8 7.8 6.0 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 47.9 54.5 54.0 52.0

Company

India

Subscriber Base (mn) 181.3 183.4 195.4 203.8

Total Minutes (mn) 888,485 957,380 1,001,807 1,076,867

India MOU per subscriber 431 432 441 450

RPM (INR) 0.436 0.428 0.454 0.461

ARPU (INR) 188 185 200 207

Africa

Subscriber Base (mn) 53.1 64.7 73.1 79.1

Total Minutes (mn) 71,913 96,736 110,453 125,654

MOU per subscriber 121.1 133.6 133.6 137.6

RPM (USD) 0.06 0.05 0.04 0.04

ARPU (USD) 7.0 6.2 6.0 6.0

Financial assumptions

Employee as % of net revenues 4.9 5.0 4.5 4.0

Average Interest rate (%) 4.4 6.5 6.2 5.5

Average Depreciation rate (%) 13.4 13.7 12.6 12.5

Tax rate (%) 34.7 48.1 31.5 32.0

Dividend payout ratio (%) 10.4 17.3 9.5 5.6

Capex (INR mn) (150,283) (150,000) (150,000) (144,000)

Debtor days 30 30 30 29

Inventory days 2 2 2 2

Payable days 365 317 306 272

Incremental debt (INR mn) (2,830) 40,062 (127,716) (109,782)


Telecom

Peer comparison valuation

Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)

Name (USD mn) FY13E FY14E FY13E FY14E FY13E FY14E

Bharti Airtel 23,527 48.6 17.6 7.6 5.9 5.0 12.7

Idea Cellular 6,975 35.6 20.6 8.1 6.4 1.8 2.8

Reliance Communication 3,156 30.9 13.5 7.9 7.0 1.5 3.3

Median - 35.6 17.6 7.9 6.4 1.8 3.3

AVERAGE - 38.4 17.2 7.9 6.4 2.8 6.3

Source: Edelweiss research

Cash flow metrics


Operating cash flow 192,937 189,234 255,640 246,893

Investing cash flow (184,190) (150,000) (150,000) (144,000)

Financing cash flow (7,211) 35,618 (134,373) (114,220)

Net cash flow 1,536 74,852 (28,733) (11,327)

Capex (150,283) (150,000) (150,000) (144,000)

Dividends paid (4,568) (4,443) (6,656) (4,438)

Profitability & efficiency ratios


ROAE (%) 8.6 5.0 12.7 13.2

ROACE (%) 8.8 7.5 11.3 12.5

Debtors days 30 30 30 29

Current ratio 0.5 0.8 0.6 0.6

Debt/EBITDA 2.9 2.9 2.0 1.5

Debt/Equity 1.4 1.4 1.0 0.7

Adjusted debt/equity 1.4 1.4 1.0 0.7

Operating ratios


Total asset turnover 0.6 0.6 0.7 0.8

Fixed asset turnover 1.1 1.2 1.3 1.4

Equity turnover 1.4 1.6 1.6 1.6

Valuation parameters


Diluted EPS (INR) 11.2 6.8 18.7 22.0

Y-o-Y growth (%) (30.0) (39.5) 175.2 18.0

CEPS (INR) 46.4 47.9 61.3 69.5

Diluted PE (x) 29.4 48.6 17.6 15.0

Price/BV (x) 2.5 2.4 2.1 1.9

EV/Sales (x) 2.7 2.4 2.0 1.7

EV/EBITDA (x) 8.2 7.6 5.9 5.1

Dividend yield (%) 0.3 0.3 0.5 0.3

Balance sheet (INR mn)

As on 31st March FY12 FY13E FY14E FY15E

Equity capital 18,988 18,988 18,988 18,988

Reserves & surplus 487,124 508,437 572,675 651,870

Shareholders funds 506,112 527,425 591,663 670,858

Minority interest (BS) 27,695 27,633 27,571 27,509

Secured loans 497,154 546,869 437,496 393,746

Unsecured loans 193,078 183,424 165,082 99,049

Borrowings 690,232 730,294 602,577 492,795

Sources of funds 1,224,039 1,285,352 1,221,811 1,191,162

Gross block 1,065,748 1,215,748 1,365,748 1,509,748

Accumulated depreciation 390,817 523,749 662,505 817,782

Net block 674,932 691,999 703,244 691,967

Total fixed assets 674,932 691,999 703,244 691,967

Goodwill 660,889 637,578 614,266 589,298

Investments 18,132 9,066 9,066 9,066

Cash and equivalents 20,300 104,218 75,485 64,159

Inventories 1,308 2,245 2,393 2,655

Sundry debtors 63,735 70,642 78,458 81,393

Other current assets 80,043 88,543 87,358 86,470

Total current assets 165,386 265,648 243,694 234,677

Sundry creditors and others 320,119 322,711 341,291 322,140

Provisions 7,240 28,288 39,228 43,765

Total current liabilities & 327,359 350,999 380,519 365,905

Net current assets (161,973) (85,351) (136,825) (131,228)

Net Deferred tax 32,060 32,060 32,060 32,059

Uses of funds 1,224,039 1,285,352 1,221,811 1,191,162

Book value per share (INR) 133.3 138.9 155.8 176.7

Free cash flow (INR mn)


Net profit 42,559 25,695 70,831 83,572

Depreciation 133,681 156,244 162,067 180,245

Others 25,512 9,066 - -

Gross cash flow 201,753 191,005 232,898 263,817

Less: Changes in WC 8,816 1,771 (22,742) 16,923

Operating cash flow 192,937 189,234 255,640 246,893

Less: Capex 133,875 150,000 150,000 144,000

Free cash flow 59,062 39,234 105,640 102,893


Bharti Airtel

Holding - Top10

Perc. Holding Perc. Holding

Life Insurance Corp Of India 4.87 ICICI Prudential Life Insurance 1.56

Commonwealth Bank Of Australia 1.41 Prudential ICICI Asset Mgmt Co 0.74

Templeton Asset Mgmt 0.74 Skagen As 0.72

T Rowe Price Associates 0.67 Vanguard Group Inc 0.49

Franklin Resources Incorporated 0.46 Dodge & Cox -

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Additional Data

Directors Data

Mr. Sunil Bharti Mittal Chairman & Managing Director Mr. Akhil Gupta Directors

Mr. Craig Ehrlich Directors Mr. Hui Weng Cheong Directors

Mr. Nikesh Arora Directors Mr. Rajan Bharti Mittal Directors

H.E. Dr. Salim Ahmed Salim Directors Mr. Tsun-yan Hsieh Directors

Mr. Ajay Lal Directors Ms. Chua Sock Koong Directors

Lord Evan Mervyn Davies Directors Mr. N. Kumar Directors

Mr. Pulak Prasad Directors Mr. Rakesh Bharti Mittal Directors

Ms. Tan Yong Choo Directors Mr. Manoj Kohli CEO (International) & Joint Managing Director

Mr. Sanjay Kapoor CEO (India & South Asia)

Auditors - S.R.Batliboi & Co., Chartered Accountants

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Bharti Airtel BUY SO L Idea Cellular HOLD SP M

Reliance Communication HOLD SU H

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Bharti Airtel

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

Coverage group(s) of stocks by primary analyst(s):

Bharti Airtel, Idea Cellular, Reliance Communication

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 118 46 17 181

* - stocks under review

Market Cap (INR) 117 57 7

Date Company Title Price (INR) Recos

Recent Research

30-Jan-13 Idea

Cellular

On track but expensive;

Result Update

113 Hold

24-Jan-13 RCom Taking the right steps;

Result Update

80 Hold

23-Jan-13 Bharti Airtel On the right path;

EdelFlash

352 Buy

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Telecom

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