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Bharti Hexacom reported mixed results for its fourth quarter of fiscal year 2026. While the company saw revenue growth, particularly in its Home Services segment, increased spending on infrastructure and challenges with mobile Average Revenue Per User (ARPU) put pressure on its cash flow. Analysts are reviewing the performance, with varied outlooks on the company's future profitability.
Revenue and Profit Declines
The company's shares saw some fluctuation on May 15, 2026, closing around ₹1562.30 after the earnings announcement. Revenue for the quarter reached ₹2,414 crore, a 5.4% rise compared to the previous year. However, net profit fell 4.6% year-on-year to ₹446.7 crore, partly due to government levies and charges. This financial picture, alongside a significant jump in capital expenditure to ₹590 crore which reduced operating free cash flow to ₹730 crore, prompted one brokerage to lower its target price for the stock from ₹1,700 to ₹1,550. Around 2.42 lakh shares were traded that day.
Valuation and Peers
Bharti Hexacom's valuation stands at a Price-to-Earnings (P/E) ratio of 43-45 times, with a market capitalization between ₹75,000 and ₹78,000 crore. This P/E is higher than its larger competitor, Bharti Airtel, which trades at 31-38 times earnings and has a market cap over ₹11 trillion. Despite this, the Indian telecom sector as a whole is expected to see annual earnings growth of around 23%.
ARPU and Spending Pressures
Mobile ARPU increased slightly to ₹252 in Q4 FY26 from ₹242 a year earlier. Analysts consider this rise marginal, especially with increasing operating costs and limited potential for further tariff increases. This ARPU trend, coupled with the substantial capital expenditure increase from ₹340 crore in Q3 FY26 to ₹590 crore in Q4 FY26, directly impacts the company's cash flow. Bharti Hexacom's management is prioritizing fiber deployment over Fixed Wireless Access (FWA) due to rising chip costs. However, FWA may still be necessary in some areas, creating additional complexity and expenses. For the full fiscal year 2026, revenue was ₹9,354 crore and profit was ₹1,733.2 crore, marking a 16% profit increase.
Stock Performance and Sector Trends
Bharti Hexacom's stock performance has been mixed. While it has shown resilience in the past, it recently declined about 8.21% over the last 12 months and 12.55% year-to-date. The broader Indian TMT sector, however, is growing, fueled by digital infrastructure development and changing consumer habits. Fixed Wireless Access (FWA) is seen as a key technology for 5G, with strong future growth potential.
Analyst Concerns and Market Sentiment
The core challenges for Bharti Hexacom lie in its profitability and cash generation, despite revenue growth. A primary concern is the mobile ARPU, which has seen limited growth despite increased data usage. This is due to a lack of significant tariff hikes and rising smartphone costs, restricting the company's ability to pass expenses to customers. This ARPU situation, combined with escalating capital expenditure, squeezes profit margins. The company's strategic shift towards fiber over FWA, while possibly beneficial long-term, creates immediate deployment costs, especially in challenging terrain where FWA might still be necessary.
The company's P/E ratio of around 44x also appears high compared to Bharti Airtel's 31-38x P/E. This valuation might be hard to sustain given the slow ARPU growth and the substantial investment needed for network upgrades. Market sentiment is divided, with analyst price targets ranging widely from ₹1,450 to ₹2,544. A recent downgrade to a 'Reduce' rating with a ₹1,550 target price suggests some analysts believe there is limited short-term upside and point to risks from ongoing investments and limited pricing power.
Future Outlook
Looking ahead, Bharti Hexacom's success will depend on its ability to turn subscriber and data growth into higher ARPU. Analysts project substantial revenue and earnings growth over the next three years, with average annual revenue growth forecast at 11.7% and earnings growth at 26.5%. Although many analysts maintain a 'Buy' rating with an average 12-month price target of approximately ₹1,894, recent downgrades and cautious targets signal near-term uncertainties. Investors will be watching how quickly ARPU recovers and how efficiently the company deploys its capital, especially with its investments in fiber infrastructure and digital services.