1QFY2013 Result Update | Telecom

August 8, 2012

Bharti Airtel
Performance highlights
(` cr) Net sales EBITDA EBITDA margin (%) PAT 1QFY13 19,362 5,849 30.2 776 4QFY12 18,739 6,233 33.3 1,006 % chg (qoq) 3.3 (6.2) (305)bp (22.8) 1QFY12 16,983 5,706 33.6 1,215 % chg (yoy) 14.0 2.5 (339)bp (36.1)

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Telecom 104,206 68,298 0.8 329/295 354,495 5 17,601 5,338 BRTI.BO BHARTI.IN

`274 -

Source: Company, Angel Research

Bharti Airtel (Bharti) reported a disappointing performance for 1QFY2013, with net profit declining for the fifth straight quarter due to higher operating costs. Telecom revenues in India have been depressed due to hyper-competition and recent regulatory and tax developments while the African business got hit due to adverse macro factors. A decline in the operating margin was the key disappointing factor. We believe that regulatory uncertainties as well as muted margin outlook for the near-term would continue to remain an overhang on the stock. We maintain our Neutral rating on the stock. Result highlights: For 1QFY2013, Bhartis consolidated revenue stood at `19,362cr, up 3.3% qoq. The revenue from Mobile-India and South Asia grew merely by 1.7% qoq which the company attributed to two significant changes, viz change in TRAI guidelines with regards processing fees and hike in service tax from 10.3% to 12.36%. The EBITDA margin of Bhartis India and Africa mobile businesses was lower than estimated at 30.3% (34.0% in 4QFY2012) and 25.8% (27.8% in 4QFY2012) due to high network operating and selling, general and administrative (SG&A) expenses. The consolidated EBITDA margin of the company declined by 305bp qoq to 30.2%. The PAT came in much lower than expected at `776cr, down 22.8% qoq. Outlook and valuation: On the domestic business front, Bhartis management indicated that the business environment remains very challenging and the company will remain committed to its strategy of protecting revenue market share. The management also opined that the factors adversely affecting the margin are likely to continue in the short term but would reverse in the medium to long term. The company has been consistently adding above 2.0mn subscribers plus per quarter in its Africa business. But the EBITDA margin of Africa operations scaling down substantially during 1QFY2013 was a big negative surprise. The management indicted that going ahead the company will strive to improve its EBITDA margin substantially. We expect Bhartis Indian and African mobile subscriber base to post a CAGR of 11.9% and 13.6% over FY201214E to 226.9mn and 68.6mn subscribers respectively. We continue to remain Neutral on the stock. Key financials (Consolidated, IFRS)
Y/E March (` cr) Net sales % chg Net profit % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2010 41,847 13.2 9,108 5.7 40.3 24.0 11.4 2.5 21.6 17.6 2.5 6.3 FY2011 59,467 42.1 6,035 (33.7) 33.7 15.9 17.3 2.1 12.4 8.2 2.8 8.2 FY2012E 71,475 20.2 4,261 (29.4) 33.2 11.2 24.5 2.1 8.4 8.1 2.4 7.1 FY2013E 79,542 11.3 3,907 (8.3) 30.9 10.3 26.7 1.9 7.2 8.1 2.0 6.5 FY2014E 87,535 10.0 5,708 46.1 32.2 15.0 18.3 1.8 9.6 10.5 1.7 5.2

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 68.5 8.4 16.9 6.2

Abs. (%) Sensex Bharti Airtel

3m 6.4

1yr 3.6

3yr 16.1 (28.5)

(12.9) (32.8)

Ankita Somani
022-39357800 Ext: 6819 [email protected]

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

Bharti Airtel | 1QFY2013 Result Update

Exhibit 1: 1QFY2013 Financial performance (Standalone, Indian GAAP)

(` cr) Net sales Access charges License fees and spectrum charges Employee costs Other expenses Total operating expenses as % to sales EBITDA Depreciation and amortization EBIT Interest cost Other income PBT Tax PAT EBITDA margin EBIT margin PAT margin
Source: Company, Angel Research

1QFY13 10,981 1,650 1,222 364 4,523 7,759 70.7 3,221 1,652 1,569 546 642 1,666 196 1,470 29.3 14.3 13.4

4QFY12 10,757 1,537 1,223 337 4,152 7,248 67.4 3,510 1,535 1,974 310 186 1,850 276 1,574 32.6 18.4 14.6

% chg (qoq) 2.1 7.4 (0.0) 8.2 8.9 7.1 (8.2) 7.6 (20.5) 76.0 (10.0) (29.1) (6.6) (329)bp (406)bp (125)bp

1QFY12 10,181 1,349 1,162 387 3,854 6,752 66.3 3,428 1,427 2,002 221 59 1,840 408 1,432 33.7 19.7 14.1

% chg (yoy) 7.9 22.3 5.2 (5.9) 17.4 14.9 (6.0) 15.8 (21.6) 147.1 (9.5) (52.0) 2.6 (434)bp (537)bp (68)bp

FY2012 41,604 5,809 4,694 1,392 16,066 27,960 67.2 13,644 5,916 7,728 1,396 625 6,956 1,226 5,730 32.8 18.6 13.8

FY2011 38,018 4,987 4,290 1,451 13,949 24,677 64.9 13,340 4,612 8,729 324 321 8,726 1,009 7,717 35.1 23.0 20.3

% chg (yoy) 9.4 16.5 9.4 (4.1) 15.2 13.3 2.3 28.3 (11.5) 330.8 (20.3) 21.5 (25.7) (229)bp (438)bp (652)bp

Subdued standalone performance: For 1QFY2013, Bharti reported a revenue growth of 3.3% qoq, with consolidated revenue coming in at `19,362.

Exhibit 2: Revenue break-up (Business segment wise)

Business segment (` cr) Mobile services India & South Asia Mobile services Africa Telemedia services Enterprise services Passive infrastructure services Others Eliminations Net revenue
Source: Company, Angel Research

1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) 10,685 5,632 944 1,191 2,405 459 1,954 19,362 10,510 5,308 916 1,121 2,418 440 1,974 18,739 1.7 6.1 3.1 6.2 (0.6) 4.5 (1.0) 3.3 9,840 4,378 946 1,041 2,277 378 1,877 16,983 8.6 28.6 (0.2) 14.4 5.6 21.5 4.1 14.0

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Mobile business India and South Asia: The revenue of the mobile business in India and South Asia grew by merely 1.7% qoq to `10,685cr on the back of 3.7% qoq growth in mobile traffic and 0.4% qoq inch up in minutes of usage (MOU) to 433min. However, the average revenue per user (ARPM) declined by 2.6% qoq to 42.7paise. The company attributed it to two significant changes viz change in TRAI guidelines with regards processing fees which restrict the sale of combo packs, and hike in service tax from 10.3% to 12.36%, effective April 1, 2012. These resulted in the domestic revenue growth getting impacted. Churn levels remain elevated at ~9% per month. All this led to a 2.2% qoq decline in average revenue per user (ARPU) to `185/month. In 1QFY2013, the company added 6.02mn subscribers in this segment, taking its total subscriber base to 187.3mn. The management indicated that the company is focusing to protect and increase revenue market share.

Exhibit 3: Trend in MOU (qoq)

500 480 460 2.7 (1.1) (0.1) (0.8) (1.0) 2.8 0.4 4 2 0 (2) (4.9) (4) (6)

Exhibit 4: Trend in VAS share (qoq)

17 16 15 15.6 16.1 15.8 16.2 16.3

(mins)

(%)

440 420

(%)

14 13 12 13.8

15.0

480

454

449

449

445

419

431

380

(5.5)

423

433

400

11 10 9 3QFY11 4QFY11 1QFY12 2QFY12 VAS share 3QFY12 4QFY12 1QFY13

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

MoU

qoq growth

Source: Company, Angel Research

1QFY13

Source: Company, Angel Research

Exhibit 5: Trend in ARPM (qoq)

0.50 0.9 0.45 (0.9) (0.6) (2.4) (0.8) (1.7) (2.6) (4.6) (4) 0 3.2 4

Exhibit 6: Trend in ARPU (qoq)

230 210 (1.6) 2.2 1.1 (2.5) (1.8) (3.8) (6.3) (4) (2.2) 0 4

(`/month)

(`/min)

(%)

0.40 0.35 0.30

(2.0)

170

0.45

0.44

0.44

0.43

0.43

0.43

0.45

0.44

0.43

215

202

198

194

190

183

187

189

185

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

ARPM

qoq growth

ARPU

qoq growth

Source: Company, Angel Research

Source: Company, Angel Research

Telemedia services: The revenue of the telemedia business increased by 3.1% qoq to `944cr, led by an improvement in APRU to `962/month from `933/month in 4QFY2012. Bharti witnessed a net addition of ~2,000 subscribers in this business during the quarter, taking its total subscriber base to 3.27mn.

August 8, 2012

1QFY13

(8)

150

(8)

(%)

190

Bharti Airtel | 1QFY2013 Result Update

Exhibit 7: Telemedia Subscriber base and ARPU trend

3,500 3,300 961 954 934 934 952 955 916 933 962 950 900 850 800 1000

(in 000's)

2,900

3,153

3,216

3,257

3,296

3,322

3,328

3,317

3,270

2,700 2,500

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

Telemedia subscribers (in 000's)

ARPU

Source: Company, Angel Research

Passive infrastructure services: The revenues in the passive infrastructure services segment remained almost flat qoq at `2,405cr. Revenue pressure was led by volume discounts which led to ~2% and 7% qoq decline in sharing revenue per operator per month for Bharti Infratel and Indus respectively. Bharti Infratel has a portfolio of ~33,600 towers with a tenancy ratio of 1.82x and Indus Towers has a portfolio of ~109,310 towers with a tenancy ratio of 1.97x.

Exhibit 8: Trend in passive infrastructure business (qoq)

1,200 2.2 1.80 1.83 1.87 1.89 1.91 1.94 1.97 2.0

No. of towers (in 00's)

900 600 300 0

1QFY13

3,272

1.68

1.73

1.77

1.79

1.81

1.82

1.82

1.6 1.4 1.2 1.0

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

Bharti Infratel (BTIL)

Source: Company, Angel Research

Indus

BTIL tenancy

Indus tenancy

August 8, 2012

1QFY13

Tenancy (x)

1.8

(`)

3,100

Bharti Airtel | 1QFY2013 Result Update

Exhibit 9: 1QFY2013 Financial performance (Consolidated, IFRS)

(` cr) Net revenue Operating expenditure EBITDA Depreciation & amortization EBIT Interest charges Non operating expenditure Other income PBT Income tax PAT Share in earnings of associate Minority Interest Adj. PAT EPS (`) EBITDA margin (%) EBIT margin (%) PAT margin (%)
Source: Company, Angel Research

1QFY13 19,362 13,513 5,849 3,757 2,092 821 1,270 488 783 (8) (1) 776 2.0 30.2 10.8 4.0

4QFY12 18,739 12,506 6,233 3,468 2,765 1,057 1,707 698 1,010 (2) 2 1,006 2.6 33.3 14.8 5.4

% chg (qoq) 3.3 8.1 (6.2) 8.3 (24.3) (22.3) (25.6) (30.1) (22.5) (147.6) (22.8) (22.8) (305)bp (395)bp (136)bp

1QFY12 16,983 11,277 5,706 3,131 2,574 855 1,719 514 1,205 (10) 1,215 3.2 33.6 15.2 7.2

% chg (yoy) 14.0 19.8 2.5 20.0 (18.8) (4.0) (26.1) (5.1) (35.1) (89.8) (36.1) (36.1) (339)bp (436)bp (315)bp

FY2012 71,475 47,762 23,712 13,368 10,344 3,819 6,526 2,260 4,265 (6) (1) 4,261 11.2 33.2 14.5 6.0

FY2011 59,467 39,432 20,035 10,206 9,829 2,182 111 129 7,666 1,778 5,887 (148) 6,035 15.9 33.7 16.5 10.1

% chg (yoy) 20.2 21.1 18.4 31.0 5.2 75.0 (14.9) 27.1 (27.5) (99.1) (29.4) (29.4) (52)bp (206)bp (416)bp

Exhibit 10: Actual vs. Angel estimates

(` cr) Net sales EBITDA margin (%) PAT
Source: Company, Angel Research

Actual 19,362 30.2 776

Estimate 19,358 32.7 1,269

% Var. 0.0 (254)bp (38.9)

Mobile Africa business: For 1QFY2013, Zain Africas revenue stood at `5,632cr, up 6.1% qoq, aided by INR depreciation. In USD terms, the revenue declined slightly by 0.5% qoq to US$1,066mn, because MOU and ARPU declined by 1.2% and 4.3% qoq to 120min and US$6.5/month respectively. The company witnessed an addition of 2.7mn subscribers, taking its total subscriber base to 55.9mn.

Exhibit 11: Operating metrics for Zain Africa

1QFY13 ARPM (US/min) MOU (min) ARPU (US$/month) Subscriber base (mn)
Source: Company, Angel Research

4QFY12 5.6 122 6.8 53.1

% chg qoq (3.1) (1.2) (4.3) 5.1

1QFY12 6.0 121 7.3 46.3

% chg yoy (10.0) (0.5) (10.5) 20.6

5.4 120 6.5 55.9

On a consolidated basis, the revenues grew by 3.3% qoq to `19,362cr. Telecom revenues in India have been depressed due to hyper-competition and recent regulatory and tax developments. Its African operations have posted a net loss at ~`670cr, which also impacted consolidated numbers of the company.

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Margins decline sharply

During the quarter, the EBITDA margin of Bhartis India mobile as well as Africa mobile businesses was much lower than estimated at 30.3% (34.0% in 4QFY2012) and 25.8% (27.8% in 4QFY2012) respectively due to high network operating and SG&A expenses. The EBITDA margin of the India mobile business eroded sharply because of Bhartis increased aggression to protect revenue market share, while the performance in Africa was hit largely due to adverse macro factors. The EBITDA margin of Africa operations scaling down substantially was a big negative surprise as the company has been continuously striving to improve it. The EBITDA margin of other business segments such as telemedia services and passive infrastructure services also declined by 65bp and 210bp qoq to 40.3% and 36.5%, respectively. All this led to a 305bp qoq decline in Bhartis consolidated EBITDA margin to 30.2%.

Exhibit 12: Segment-wise EBITDA margin trend (qoq)

50 40
(%)

45.2 37.0 33.3 25.7

45.5 37.7 34.2

44.2 37.5 38.8 37.3 33.7 21.5 33.8

41.0 38.6 34.0

40.3 36.5

30 20 10

30.3

22.1 16.9

14.6 16.5 4QFY12 1QFY13

4QFY11

1QFY12

2QFY12

3QFY12

Mobile services-India & South Asia Enterprise services

Source: Company, Angel Research

Telemedia services Passive infrastructure services

Exhibit 13: Opex break-up (qoq)

100 80 60 33.5 33.6 33.7 32.2 33.3 30.2

17.1
5.7

16.6
5.3

16.2 8.4 22.7 13.9 2QFY12 License fee

5.2

17.7 8.4 22.8 14.2 3QFY12 Employee cost

4.7

16.9 8.6 22.6 13.9 4QFY12 S,G&A cost

4.7

18.3 8.4 24.0 14.3 1QFY13 EBITDA margin

4.8

(%)
40 20 0

8.5 21.9 13.3 4QFY11

8.8 22.5 13.2 1QFY12

Access charges

Network costs

Source: Company, Angel Research

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Outlook and valuation

On the domestic business front, Bhartis management indicated that the business environment remains very challenging and the company will remain committed to its strategy of protecting and increasing revenue market share. The management also opined that the factors adversely affecting the margin are likely to continue in the short term but reverse in the medium to long term. The company substantially reduced the 3G tariffs and also launched various vouchers, which is going to impact the ARPM negatively. We believe it is difficult to see any major improvement in Bhartis domestic business anytime soon as a significant cut has been taken by telecom companies including Bharti on 3G tariffs and as a lot of regulatory uncertainties continue to prevail. Bharti is on its way to turnaround its Africa business by bringing down its network operating expenditure by outsourcing various network-related developments. The company has been consistently adding above 2.0mn subscribers plus per quarter in its Africa business. But during 1QFY2013, the EBITDA margin of Africa operations scaled down substantially and the same was a big negative surprise as the company is continuously striving to improve it. The management indicated that going ahead the company will strive to improve its EBITDA margin substantially. This looks feasible to some extent as MTN, which is one of the largest telecom operators in that region, is currently operating at 40%+ EBITDA margin. We do not expect the EBITDA margin of Bhartis Africa business to reach the level at which MTN is operating (as MTN is the largest telecom player in that region) but still Bharti has got ample headroom to scale it up.

Exhibit 14: MTN vs. Bharti - Zain

Revenue (US$mn) MTN Bharti - Zain MTN EBITDA margin Bharti - Zain

FY2011
FY2012

15705
16875

2878*
4137

41.4
43.0

25.3
26.5

FY2013E
FY2014E

16762
17805

4520
5187

43.3
43.2

26.6
28.0

Source: Company, Bloomberg, Angel Research; Note: * Exclude revenue from April 1, 2010-7June, 2011

The key performance indicators (KPIs) in Africa are expected to remain stable going ahead. Thus, we expect the combination of stable KPIs and cost efficiencies to drive EBITDA margin of the Africa business to 26.6% in FY2013 and 28.1% in FY2014 from 26.5% in FY2012 and 25.3% in FY2011. We expect Bhartis Indian and African mobile subscriber base to post a CAGR of 11.9% and 13.6% over FY201214E to 226.9mn and 68.6mn subscribers respectively. In addition, we expect value added services (VAS) share to inch up due to surging demand for non-SMS data services; this would further comfort the companys ARPM. But weak 1QFY2013 performance and muted outlook on margins in the near term is leading to downgrade in our estimates. Key downside risks such as 1) uncertainty in regulatory outcome; 2) pricing scenario in Africa operations; and 3) delay in return on investments made in 3G launches, still loom. The stock is currently trading at 5.2x FY2014E EV/EBITDA and 18.3x FY2014E EPS. We continue to remain Neutral on the stock.

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Exhibit 15: One-year forward EV/EBITDA (x)

525,000 450,000 375,000
EV (`cr)

300,000 225,000 150,000 75,000 0

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Apr-12 Aug-12

EV
Source: Company, Angel Research

17x

14x

11x

8x

5x

Exhibit 16: Change in estimates

FY2012 Parameter (` cr) Net revenue EBITDA PBT Tax PAT Earlier estimates 80,076 26,265 8,750 2,888 5,867 Revised estimates 79,542 24,553 5,937 2,032 3,907 Variation (%) (0.7) (6.5) (32.1) (29.6) (33.4) Earlier estimates 86,613 29,031 11,238 3,709 7,534 FY2013 Revised estimates 87,535 28,200 8,520 2,812 5,708 Variation (%) 1.1 (2.9) (24.2) (24.2) (24.2)

Source: Company, Angel Research

Exhibit 17: Recommendation summary

Company Bharti Airtel Idea Cellular RCom Reco. Neutral Neutral Neutral CMP (`) 274 76 56 Tgt. price (`) Upside (%) FY2014E P/BV (x) 1.8 1.6 0.3 FY2014E P/E (x) 18.3 15.6 9.6 FY2011-14E EPS CAGR (%) (1.9) 21.5 (3.3) FY2014E RoCE (%) 10.5 12.2 4.4 FY2014E RoE (%) 9.6 10.2 3.1

Source: Company, Angel Research

Company Background
Bharti Airtel is India's leading telecommunication service provider, offering mobile services in all the 22 circles of the country and having a subscriber base of 187mn. In 2010, Bharti acquired Zain's telecom business in 15 countries of Africa and is currently present in 17 African countries (48.4mn subscribers). The company also has a presence in Sri Lanka (1.5mn subscribers) and Bangladesh (4.3mn subscribers). Bharti also holds a 42% stake in Indus Towers, a JV between Bharti, Vodafone and Idea Cellular.

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Profit and Loss account (Consolidated, IFRS)

Y/E March (` cr) Net sales Roaming and access charges % of net sales Network operating exp. % of net sales License fee % of net sales Other expenses Total expenditure % of net sales EBITDA % of net sales Dep. and amortization Non operating expenses EBIT Interest charges Other income, net Profit before tax Provision for tax % of PBT PAT Share in earnings of associate Minority interest Adj. PAT EPS (`) FY2010 41,847 4,481 10.7 8,912 21.3 4,088 9.8 7,513 24,993 59.7 16,854 40.3 6,284 (18) 10,589 18 70 10,640 1,345 12.6 9,295 187 9,108 24.0 FY2011 59,467 7,499 12.6 12,993 21.8 5,166 8.7 13,774 39,432 66.3 20,035 33.7 10,206 111 9,719 2,182 129 7,666 1,778 23.2 5,887 (148) 6,035 15.9 FY2012E 71,475 9,869 13.8 16,180 22.6 6,112 8.6 15,602 47,762 66.8 23,712 33.2 13,368 10,344 3,819 6,526 2,260 34.6 4,265 (6) (1) 4,261 11.2 FY2013E 79,542 11,331 14.2 18,821 23.7 6,547 8.2 18,290 54,989 69.1 24,553 30.9 14,990 9,563 3,626 5,937 2,032 34.2 3,906 (1) 3,907 10.3 FY2014E 87,535 12,298 14.0 20,150 23.0 7,015 8.0 19,871 59,335 67.8 28,200 32.2 16,194 12,006 3,486 8,520 2,812 33.0 5,708 5,708 15.0

August 8, 2012

Bharti Airtel | 1QFY2013 Result Update

Balance sheet (Consolidated, IFRS)

Y/E March (` cr) Liabilities Share capital Reserves and surplus Tot. shareholders funds Minority interest Secured loans Unsecured loans Total debt Other liabilities Total liabilities Assets Gross block Acc. depreciation Net block Goodwill Oth. non-current assets Investments Inventories Sundry debtors Cash and equivalents Other current asst Total current assets Less: - current liab. Less:- provisions Net current assets Net deferred tax Miscellaneous exp. Total assets 69,725 21,462 48,263 5,989 1,825 5,236 48 3,571 2,532 2,381 8,532 10,841 41 (2,350) 1,249 60,212 96,810 31,668 65,142 63,732 1,918 622 214 5,493 958 3,921 10,585 28,430 118 (17,962) 4,506 117,959 1,899 40,295 42,194 2,529 8,147 2,042 10,190 5,300 60,212 1,899 46,868 48,767 2,856 53,234 8,437 61,671 4,665 117,959 1,899 48,713 50,611 2,770 49,715 19,308 69,023 5,078 127,482 112,529 45,036 67,493 66,089 3,543 1,813 131 6,374 2,030 4,461 12,995 29,450 129 (16,584) 5,128 127,482 122,529 60,026 62,503 66,089 3,543 1,315 131 7,409 601 5,561 13,702 36,157 153 (22,609) 7,767 118,608 131,529 76,220 55,309 66,089 3,543 1,315 131 8,154 3,374 6,794 18,453 39,015 153 (20,714) 8,767 114,309 1,899 52,175 54,074 2,770 42,317 15,414 57,731 4,035 118,608 1,899 57,439 59,338 2,770 35,500 12,931 48,431 3,771 114,309 FY2010 FY2011 FY2012E FY2013E FY2014E

August 8, 2012

10

Bharti Airtel | 1QFY2013 Result Update

Cash flow statement (Consolidated, IFRS)

Y/E March (` cr) Pretax profit from operations Depreciation Expenses (deferred)/written off Pre tax cash from operations Other income/prior period ad Net cash from operations Tax Cash profits (Inc)/Dec in Current assets Current liabilities Net trade working capital Cash flow from oper. actv. (Inc)/Dec in fixed assets (Inc)/Dec in intangibles (Inc)/Dec in investments (Inc)/Dec in net dfr. tax asset (Inc)/Dec in minority interest (Inc)/Dec in oth. non-curr. ast. Cash flow from investing actv. Inc/(Dec) in debt Inc/(Dec) in equity/premium Others Dividends Cash flow from financing actv. Cash generated/(utilized) Cash at start of the year Cash at end of the year 3,501 (4,352) (851) 14,733 (13,633) (1,953) (1,431) (1,249) 1,458 (801) (17,608) (1,690) 2,944 3,484 444 4,293 1,418 1,115 2,532 (3,628) 17,666 14,038 30,131 (27,085) (57,743) 4,614 (3,257) 328 (94) (83,237) 51,481 1,130 (635) 444 51,532 (1,575) 2,532 958 (1,337) 1,032 (305) 17,328 (15,719) (2,357) (1,191) (622) (87) (1,631) (21,606) 7,352 (1,970) 413 444 5,351 1,072 958 2,030 (2,136) 6,731 4,595 23,490 (10,000) 499 (2,639) 1 (12,139) (11,293) (1,044) 444 (12,780) (1,429) 2,030 601 (1,978) 2,857 879 22,781 (9,000) (1,000) (10,000) (9,300) (264) 444 (10,008) 2,774 601 3,374 FY2010 10,571 6,284 16,854 70 16,924 (1,345) 15,584 FY2011 7,536 10,206 17,742 129 17,872 (1,778) 16,093 FY2012E 6,526 13,368 19,894 19,894 (2,260) 17,633 FY2013E 5,937 14,990 20,927 20,927 (2,032) 18,895 FY2014E 8,520 16,194 24,714 24,714 (2,812) 21,902

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Bharti Airtel | 1QFY2013 Result Update

Key ratios
Y/E March Valuation ratio (x) P/E (on FDEPS) P/CEPS P/BVPS Dividend yield EV/Sales EV/EBITDA EV/Total assets Per share data (`) EPS Cash EPS Dividend Book value DuPont analysis Tax retention ratio (PAT/PBT) Cost of debt (PBT/EBIT) EBIT margin (EBIT/Sales) Asset turnover ratio (Sales/Assets) Leverage ratio (Assets/Equity) Operating ROE Return ratios (%) RoCE (pre-tax) Angel RoIC RoE Turnover ratios (x) Asset turnover (fixed assets) Receivables days Payable days 0.8 28 158 0.7 34 263 0.6 33 225 0.6 34 240 0.8 34 240 17.6 22.8 21.6 8.2 18.5 12.4 8.1 18.0 8.4 8.1 18.9 7.2 10.5 27.6 9.6 0.9 1.0 0.3 0.7 1.4 21.6 0.8 0.8 0.2 0.5 2.4 12.4 0.7 0.6 0.1 0.6 2.5 8.4 0.7 0.6 0.1 0.7 2.2 7.2 0.7 0.7 0.1 0.8 1.9 9.6 24.0 40.6 1.0 111.2 15.9 42.8 1.0 128.5 11.2 46.4 1.0 133.3 10.3 49.8 1.0 142.4 15.0 57.7 1.0 156.3 11.4 6.8 2.5 0.4 2.5 6.3 1.8 17.3 6.4 2.1 0.4 2.8 8.2 1.4 24.5 5.9 2.1 0.4 2.4 7.1 1.3 26.7 5.5 1.9 0.4 2.0 6.5 1.3 18.3 4.8 1.8 0.4 1.7 5.2 1.3 FY2010 FY2011 FY2012E FY2013E FY2014E

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Bharti Airtel | 1QFY2013 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: [email protected]

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Bharti Airtel No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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