- Jefferies cut Bharti Airtel's target price from Rs 2,575 to Rs 2,250 citing capital allocation concerns
- Bharti Airtel's entry into the NBFC sector raises potential risks for capital deployment, says Jefferies
- Tariff hikes may be delayed due to a possible postponement of Jio's IPO beyond mid-2026
The shares of Bharti Airtel are in focus in Thursday after Jefferies issued a target price cut on the counter, citing concerns over capital allocation and potential delays in industry-wide tariff hikes.
In its latest note, Jefferies has maintained its 'buy' call on the telecom giant, but has cut the target price from Rs 2,575 to Rs 2,250. This revision comes on the back of Bharti Airtel's entry into the non-banking financial company (NBFC) sector, a move that the firm thinks could invite new risks regarding how the company deploys its capital.
Jefferies has also subsequently lowered its target EV/Ebitda multiple from 13x to 12x, adding that entering an industry dominated by consolidated players could prove to be a 'tricky' and could follow a potential capping of future shareholder payouts.
The report further highlights headwinds in the telecom sector in general, notably cutting India revenue and Ebitda estimates for Bharti Airtel by 6% to 8%. This is driven by the likelihood that Jio's highly anticipated initial public offering (IPO) could be delayed beyond the first half of 2026. Such a delay could see the postponement of any significant tariff hikes.
Other potential risks for Bharti Airtel in the near future are rising energy prices and inflationary pressures, which may pose a threat to the timing of tariff increases. Jefferies is now expecting a single tariff hike of 15% in December 2020, which is far more conservative outlook than previous estimates.
Despite these headwinds, however, the brokerage remains bullish about Bharti Airtel's long-term growth prospects. The stock has fallen 14% year-to-date, underperforming the benchmark Nifty 50 by 5 percentage points. Jefferies views this dip as an attractive entry point, noting that the company has successfully de-risked its operations by doubling renewable energy usage over the last five years.
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