Bharti Airtel free cash flow and tariff hikes support growth outlook

Investment View and Target Price

In its 14 May 2026 4QFY26 results update, Motilal Oswal Financial Services retained its BUY rating on Bharti Airtel with a revised sum-of-the-parts target price of Rs 2,180, compared with Rs 2,205 previously. The lower target reflects a reduced share count following the proposed promoter share issuance. The broker considers the muted quarterly India wireless performance temporary and continues to favour Bharti Airtel for its robust free cash flow generation, improving return ratios, prospective tariff increases, Home broadband momentum and sustained Airtel Africa growth.

The bull and bear cases are Rs 2,645 and Rs 1,715 per share, respectively. Near-term triggers are tariff hikes and the planned JPL IPO.

4QFY26 Financial Performance

Bharti Airtel reported consolidated revenue of Rs 554 billion in 4QFY26, up 2.6 per cent quarter on quarter and 16 per cent year on year, and around 1 per cent above Motilal Oswal's estimate. Consolidated EBITDA rose 2.3 per cent quarter on quarter and 17 per cent year on year to Rs 315 billion, broadly in line with estimates.

India Wireless: Temporary Quarterly Weakness

India performance was subdued, partly because 4QFY26 had two fewer days. India wireless ARPU was Rs 257 per month, down 0.6 per cent quarter on quarter but up 5 per cent year on year. Reported subscribers reached 373.2 million, including 299.1 million data subscribers and 296.8 million 4G subscribers.

Data volume increased 7.4 per cent quarter on quarter, while data usage per data subscriber reached 31.4 GB per month. Motilal Oswal expects the India wireless outlook to improve with the anticipated tariff increases.

Homes Broadband Momentum

Homes remained a key growth engine. Home broadband added approximately 1.13 million subscribers in 4QFY26, taking the base to about 14.2 million, up 42 per cent year on year. Homes revenue grew approximately 10 per cent quarter on quarter and 37 per cent year on year to Rs 21.9 billion, while EBITDA increased approximately 10 per cent quarter on quarter to Rs 11 billion.

Reported Homes ARPU declined approximately 1 per cent quarter on quarter to Rs 527 per month. Management said acquisition ARPU had stabilised and blended Homes ARPU was plateauing, while it continued to prioritise subscriber acquisition because of the high customer lifetime value.

Home passes reached approximately 45 million after increasing by about 8 million during FY26. The company has pivoted to a fibre-first approach following higher customer-premises-equipment costs for fixed wireless access.

Enterprise, Africa and DTH Performance

Airtel Business revenue increased 2.6 per cent quarter on quarter to Rs 54.9 billion, while EBITDA margin expanded by approximately 100 basis points to 42.9 per cent. Management cited a strong order book and funnel, deal wins in connectivity, IoT, cloud and Nxtra, and approximately 24 sovereign-cloud deals.

Management expects medium-term margin compression from lower-margin adjacencies, although these are expected to require insignificant incremental capital expenditure. Airtel Africa delivered reported revenue growth of approximately 7 per cent quarter on quarter and EBITDA growth of approximately 8 per cent, supported by higher Nigeria margins and favourable currency movements. DTH remained weak, with revenue down approximately 1 per cent quarter on quarter and EBITDA down approximately 5 per cent.

Free Cash Flow, Leverage and Capital Expenditure

4QFY26 consolidated free cash flow moderated to Rs 84 billion from approximately Rs 169 billion in 3QFY26 because of seasonal working-capital build-up and AGR payments. However, FY26 free cash flow after leases and interest improved sharply to Rs 542 billion from Rs 389 billion in FY25.

Together with the Rs 157 billion rights issue, this reduced consolidated net debt excluding leases by approximately Rs 475 billion year on year to Rs 910 billion, with leverage declining to 0.84 times. The India business is debt-free excluding leases and payments due to the Government of India for spectrum and AGR dues.

India capital expenditure excluding Indus was Rs 310 billion in FY26, marginally above FY25. Management expects FY27 capital expenditure to remain in a similar range.

Airtel Africa Transaction and Capital Allocation

Bharti Airtel will issue approximately 147 million shares to promoter entity ICIL for its approximately 16.3 per cent Airtel Africa stake. The transaction avoids approximately Rs 282 billion of cash outflow but results in approximately 2.4 per cent equity dilution.

Motilal Oswal considers the acquisition positive because of Airtel Africa's long-term opportunity. The broker expects the NBFC investment to be measured, at less than one quarter of Bharti Airtel's free cash flow over five to seven years. Any further international acquisition, other than Airtel Africa, is identified as the principal capital-allocation concern.

Growth Outlook and Estimates

Motilal Oswal has adjusted its estimates for FY26 actuals and the dilution. It forecasts approximately 15 per cent consolidated revenue and EBITDA CAGR over FY26 to FY28E, driven by the following factors:

• An approximately 15 per cent India smartphone tariff hike from 2QFY27.
• Accelerating Home broadband additions.
• Double-digit constant-currency growth in Africa.
• Steady Enterprise growth.

The broker expects more than Rs 1.3 trillion of free cash flow over FY26 to FY28, net cash status by FY29 and return ratios near 25 per cent by FY28.

Valuation Framework

India wireless and Homes are valued using discounted cash flow, implying approximately 12 times March 2028E EV/EBITDA. DTH and Enterprise are valued at 5 times and 10 times March 2028E EBITDA, respectively. Indus Towers and Airtel Africa stakes carry a 25 per cent discount.