UBS hikes target prices on Bharti Airtel, Vodafone Idea, Indus Towers amid govt relief hopes

The government has no immediate plan to divest its stake in Vodafone Idea, as per sources.

Foreign brokerage UBS raised its target prices on telecom majors as the government might offer the beleaguered telcos some relief measures.

As telecom majors undertake a tariff hiking cycle, UBS expects around 60-75 percent of the total tariff hikes to flow through to revenues over three quarters. Additionally, the churn is expected to be lower during this cycle, as the incidence of double SIMS has come down substantially.

The brokerage maintained its neutral rating on Bharti Airtel and Indus Towers, with an increased target price of Rs 1,595 and Rs 440 respectively. The brokerage also reiterated its buy call on Vodafone Idea, bumping its target price up from Rs 18 to Rs 19 per share.

At 9.35 am, Indus Tower shares were higher by 0.8 percent on the NSE at Rs 441.5 apiece, while Bharti Airtel's stock price was absolutely flat at Rs 1,523 per share. On the other hand, Vodafone Idea shares slipped around a percent to Rs 15.9 each.

UBS added that it sees some downside risk to consensus estimates for the telecom players.

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Vodafone Idea was in focus after the government cleared the air on its divestment plans in the telecom firm. The government has no immediate plan to divest its stake in Vodafone Idea (Vi) and a decision will be taken once signs of a turnaround in the telco are visible, sources told Moneycontrol, requesting anonymity.

The government is also evaluating the request for a potential waiver of bank guarantees on upcoming regulatory dues of Rs 24,747 crore, they said.

“Vi will have to inform the DoT about their internal accruals and how much of that has gone up. And, what sort of financial burden they can take. As of now, they haven’t really shared any substantial update on their operations post the fundraising,” a senior telecom ministry official told Moneycontrol, adding that the telco is still in the early days of implementing its turnaround strategy.

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