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Bharti Airtel shares could surge upto 8%

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Traders expect shares of Bharti Airtel to surge in the near term, by as much as 8 per cent, following the increase in the stock futures’ open interest that climbed to a 14-month high.

A likely duopoly in India’s telecom industry in the aftermath of an apex court ruling on statutory dues should brighten Bharti Airtel’s prospects, with competition easing, analysts said. Even though Bharti Airtel also has to pay more than Rs 34,000 crore by way of dues, investors believe a $3-billion fund-raising should help the company meet its commitments.

By contrast, many believe that Vodafone Idea, which owes about Rs 44,000 crore in dues to the government, faces a stiffer hurdle.

In the event of Vodafone Idea exiting, Bharti Airtel stands to gain market share. Bharti Airtel climbed 5.5 per cent to Rs 500 on Friday after the Supreme Court’s verdict on statutory dues.

The stock hit a 52-week high during the session.

Open interest in Bharti Airtel’s futures surged nearly 10 per cent to 5.2 crore. “Open interest is at the highest level since October 2018.

The stock had seen rollover of 94 per cent in the last series,” said Chandan Taparia, derivative analyst at Motilal Oswal.

“The stock has major support at Rs 475, and it can go up to Rs 530-540 levels.” Survival in doubt?18 Jan, 2020The telecom industry may be headed for a duopoly comprising Bharti Airtel and Reliance Jio, brokerages said following a Supreme Court decision to dismiss a petition seeking a review of its judgment on adjusted gross revenue.

Brokerages believe that Airtel's recent $3 billion-fund raising gives it the liquidity to withstand the AGR shock, while it will be critical to see the way ahead for Vodafone Idea, which has AGR-related dues of more than Rs 53,000 crore.

Analysts also said the chances of a curative petition being admitted are slim.Brokerage Take18 Jan, 2020Edelweiss has maintained buy rating on Bharti Airtel with a target price of Rs 533 and IIFL has cited Reliance Industries and Bharti Airtel as its top picks in the telecom sector.

While Vodafone Idea shares plunged 25% to end at Rs 4.51 on Friday following the verdict, Bharti Airtel's shares jumped 5.5% to Rs 500 and Reliance Industries' stock gained nearly 3% to Rs 1,580.65. Here's what brokerages are saying on the way forward for the telecom industry: Edelweiss18 Jan, 2020-Market would turn into duopoly in absence of any government intervention -Government intervention not ruled out given consequences of further consolidation in telecom -Chances of curative petition being admitted are slim IIFL18 Jan, 2020-Government may spread out payments over long period to avoid pushing Vodafone Idea into NCLT -Chances of relief from curative petition before January 23 deadline look remote -Bharti Airtel and Reliance Industries are top picks in sector Jefferies18 Jan, 2020-Telecom companies will likely file a curative petition -Govt is likely to provide relief by allowing staggered payments over a longer timeline -Best case for lenders is Vodafone Idea survives long enough and repays loans back On technical charts, the stock is moving up after a consolidation over a 10-year period. “The stock has seen a consolidation in the past 11 years between Rs 220 and Rs 545.

It may see a good rally after crossing the Rs 545 level and could see upside of 50 per cent over the longer term, post a sustainable breakout," said Yogesh Radke, Head of Alternative and Quantitative Research at Edelweiss. Brokerages also believe the share price will rise in the near term.

Morgan Stanley believes the stock will climb, relative to the country index, over the next one month. “Given the high leverage ratio for Vodafone Idea and its possible inability to pay the liability, there is a possibility that the telecom industry in India could become further consolidated into two players.

We believe that Airtel will have the ability to pay this liability, given its recent fund raising, and hence could be a key beneficiary of any possible consolidation in the industry,” said Morgan Stanley. Edelweiss, meanwhile, has maintained a ‘buy’ rating on Bharti Airtel with a target price of Rs 533, given its ability to fund liabilities and gain market share.




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