Bharti Airtel dividend to double in FY25, quadruple by FY27: HSBC

HSBC believes Bharti Airtel is well-positioned to improve its return on invested capital (ROIC), driven by margin expansion and better capital turnover

HSBC Global Research projects Bharti Airtel's dividend per share to double in fiscal 2025 compared to the previous year and to increase four-fold over the next three years, driven by a robust free cash flow outlook and improved leverage sustainability within its Indian operations.

The brokerage projects a 114 percent increase in Bharti Airtel's dividend per share for fiscal year 2025, reaching Rs 17.1, up from Rs 8 in FY24. The brokerage also anticipates a fourfold rise in DPS over the next three years, forecasting Rs 22.7 in FY26 (a 33% y/y increase) and Rs 34.1 in FY27 (a 50% y/y increase). These estimates are 28-45% above consensus for FY25-27.

HSBC highlights that Bharti Airtel's increasing cash flow requirements are linked to its promoter entity, Bharti Telecom Ltd (BTL), which has seen a rise in debt levels. BTL holds a 40.33% stake in Bharti Airtel. The brokerage estimates that BTL's interest expenses will reach approximately Rs 3,200 crore in FY26, driven by a recent increase in debt to raise its stake in Bharti Airtel in November 2024.

Assuming that the dividend paid by Bharti Airtel at the end of FY25 should cover BTL's finance costs for FY26, this would imply that Bharti Airtel's total dividend would need to increase to around Rs 9,900 crore, HSBC added.

HSBC believes Bharti Airtel is well-positioned to improve its return on invested capital (ROIC), driven by margin expansion and better capital turnover. The brokerage expects mobile ARPU to grow, supported by a tariff hike in FY27, subscriber migration to higher-tier data plans due to increased data consumption, and growth in high-value post-paid subscribers.

Mobile ARPU is forecast to reach Rs 301 by FY27. In home broadband, revenue is expected to grow at a CAGR of around 24% from FY24 to FY27, driven by a 2.1x increase in subscribers to 15.9 million by FY27. Consequently, HSBC forecasts consolidated EBITDA and EPS CAGRs of approximately 15% and 75%, respectively, over FY24-27. Additionally, deleveraging is expected to improve as capex intensity (as a percentage of revenue) declines, with lower year-over-year spending on 5G coverage and rural expansion, it said.