Bharti Airtel: Q2FY14 Results Analysis

Bharti Airtel, the country's largest telecom operator, has announced its results for the quarter ended September 2013. The company has posted a bottomline of Rs 512 crore, lower by 29% on a YoY basis, after incurring a forex loss of Rs 340 crore. The result may appear to be a dampener at first glance, but if we keep the forex loss aside, the net profit stood at Rs 854 crore as against Rs 721 crore reported during the same quarter last fiscal.

Apart from the net profit numbers, the company has been able to beat the street's expectations on all parameters. Its consolidated revenues increased by 5.2% sequentially and 10% on a yearly basis to stand at Rs 21324 crore in the quarter. The topline was mainly driven by its Africa division.

The consolidated EBITDA grew by 15.1% YoY to Rs 6832 crore, with the margins expanding to 32% from 30.6% in the corresponding quarter last year. This was driven by its EBITDA margin improvement in the India market from 32.6% to 34.8%.

The finance cost for the company (including the forex loss) moved up by 38% on a QoQ basis to Rs 1611 crore. It also reported an exceptional loss of Rs 81.9 crore during the September quarter as against a gain of Rs 225.2 crore in June quarter due to regulatory levy in one of the group's international operations - this is being contested by the industry and customers.

Bharti's consolidated net debt has reduced to USD 9697 million, resulting in the Net Debt-to-EBITDA ratio (in USD terms) improving to 2.18x as compared to 2.59x at the end of the September 2012 quarter. Its consolidated operating free cash flows for the quarter stood at Rs 4693 crore, reflecting a robust growth of 117.1% on a YoY basis.

Commenting on the results, Sunil Bharti Mittal, Chairman, Bharti Airtel said "Mobile internet is now a major engine of growth for Airtel across all geographies. Our sustained investment in this segment will further enhance customer experience and seamless coverage. The revenue growth in Africa reflects the inherent potential in the world's most promising continent. I am also pleased to see the evolution of Airtel Money into a significant service in geographies which are relatively under-banked."

The markets have reacted positive to the results, and the scrip is trading higher by 3.87% at Rs 354 on the BSE. Looking at the strong set of numbers it can be said that investors with long-term horizon can take positions in the counter in a staggered manner.