Here’s why CLSA has downgraded Bharti Airtel to underperform

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26 Aug, 2025 12:21

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Bharti Airtel was on the investors’ radar on Wednesday on the back of a downgrade to the stock by CLSA. The stock fell over 1.3 percent intraday.

The brokerage house now has an underperform rating on the stock with a target price of Rs 380. It flagged concerns on unprecedented disruption, high risk of dilution in average revenue per user (ARPU) in the medium term. Furthermore, the research firm sees a sharp 4-19 percent cut in earnings before interest, taxes, depreciation and amortisation (EBITDA) over FY17-19 calendar year. The target price implies a mere 4 percent upside to the stock.

In response to Reliance Jio’s Rs 149 and Rs 303 plan, the telecom major rolled out two plans of Rs 145 and Rs 345 that offer unlimited voice calling and up to 1GB data per day. The Rs 345 plan offers unlimited voice calling to all networks and 1GB data per day, but 0.5 GB of this could only be used at night. The research firm expects adoption of this plan to be higher on the back of limitless calls to all networks.

CLSA believes that the introduction of offers to counter Reliance Jio’s aggressive plans could hit Bharti Airtel’s ARPUs. “Bharti Airtel’s latest offerings blunt the value proposition of Jio’s prime plans and will help limit subscriber churn at the top end. But these will hit Bharti Airtel’s ARPUs mainly due to Arpu dilution at the top end of subscribers,” it said in its report.

The brokerage house expects the dilution in ARPU to hit the company’s financials going forward. It lowered its FY18-19 revenue target by 10 percent, while EBITDA will be hit by 17-19 percent in a bid to factor this ARPU hit.

A possible upside to the stock could be reduction in dual-sims and sector consolidation at an accelerated pace, CLSA highlighted.

The stock has gained nearly a percent in the past 15 days, while its 3-day loss stands at just over 0.44 percent. At 09:18 hrs, the stock was quoting at Rs 358.80, down Rs 2.55, or 0.71 percent, on the BSE. It touched an intraday high of Rs 360.45 and an intraday low of Rs 358.40.

(Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Moneycontrol.com.)