Global brokerage Nomura has increased its price target for Bharti Airtel to ₹2,355, maintaining a positive view on the stock. Analysts argue the telecom giant is currently undervalued compared to rival Reliance Jio, citing strong profit potential and anticipated tariff hikes. The report also highlights risks related to high foreign ownership in the stock.
What Happened
Brokerage firm Nomura has raised its target price for Bharti Airtel shares to ₹2,355, up from the previous ₹2,220. The firm maintained its positive stance on the company, pointing to several business strengths that it believes the stock market has not yet fully priced in. This update comes as the company continues to focus on growing its revenue per customer and expanding into digital services like cloud and data centers.
The Valuation Comparison
A key argument in the report is that Bharti Airtel is currently trading at a lower valuation than its main competitor, Reliance Jio. Nomura estimates that Airtel’s India telecom business is valued at about 9.3 times its operating profit (EBITDA), while Reliance Jio trades at roughly 12.2 times. The brokerage suggests this difference is not justified, given that Airtel shows strong metrics in how much it earns from each customer and in its ability to generate cash.
Growth Drivers And Business Shift
Nomura expects Bharti Airtel to see significant growth in its operating profit and free cash flow between fiscal years 2026 and 2029. This optimistic outlook relies on a few key factors. First, the firm anticipates another tariff hike in the third quarter of the 2027 fiscal year, which would boost income. Second, as the company finishes its 5G network rollout, its spending on new infrastructure is expected to moderate. This should leave more cash in the business for debt reduction and other uses. Additionally, the company is diversifying its revenue through digital services, lending, and an increased stake in Indus Towers.
The FII Risk Factor
While the report is largely positive, it also flags a specific risk for shareholders. Approximately 28% of Bharti Airtel is owned by foreign institutional investors (FIIs). Because of this large holding, the stock can face extra selling pressure whenever global markets experience stress or when foreign investors pull money out of emerging markets. This means the stock price could fluctuate based on global economic sentiment, even if the company's own business performance remains steady.
What Investors Should Track
For those following the stock, the next important monitorable will be any announcements regarding telecom tariff changes. Investors may also want to track the company’s ability to maintain its average revenue per user (ARPU) growth as the market consolidates to three major players. Additionally, observing the trend in infrastructure spending will be crucial to confirming if the anticipated improvement in free cash flow materializes as the 5G rollout concludes.