Higher Finance Costs Pulls down Bottomline Growth for Bharti Airtel

Bharti Airtel’s bottomline growth came down by 72% on a YoY basis in their December 2012 results. It now stands at Rs 284 crore. The main dragger for the bottomline was a higher finance cost, which went up by 69.1% to stand at Rs 1331.9 crore for Q3FY13 and a higher tax rate, which stood at almost 70% of profit before tax for Q3FY13.

The topline grew by 9.6% on a YoY basis to Rs 20,253 crore for the quarter on a consolidated basis. However, the consolidated EBITDA grew by 3.8% YoY and 1.2% QoQ to Rs 6,183 crore, led by a better performance in Indian mobile and tele-media in the recently concluded quarter.

The revenue for India and South Asia (SA) grew by 8.4% YoY and 3.1% QoQ to Rs 14,270 crore for Q3FY13. The EBITDA remained flat and grew by a mere 0.5% YoY to Rs 4,550 crore, largely driven by the mobile segment. On the African front, the EBITDA increased by 1% QoQ to USD 300 million on a 3% QoQ revenue growth (11% traffic growth, 7% RPM decline). The EBITDA margin declined by 70 bps QoQ to 26.5%.

The company continued to improve on its operating metrics. The voice traffic increased by 2.8% on a QoQ basis, while the average revenue per user (ARPU) was up by 4.5% on a sequential basis. The average revenue per minute (ARPM) remained stable at 42.5 paise, whereas the minutes of usage (MOU) were up by 4.3% on a QoQ basis for Q3FY13. 

The total subscriber base stood at 181.92 million as against 185.9 million in Q2FY13. Also, there was a marked improvement in the subscriber churn, which was down by 260 basis points QoQ to 5.9%.

We believe that the performance shown in Bharti’s operation metrics this quarter will continue to improve, as the operating environment will witness some up-move, with a reduction in the number of operators and subsiding regulatory overhang. Though the secular tariff hikes might not happen in the near term, a gradual improvement is likely to be seen going forward.

However, it is advisable to look out for the annual results before taking a call on the counter. Investors who are willing to take a risk can look for a staggered entry in the stock.