The downgrade was attributed to a steep 40% valuation premium over Bharti Airtel and an unfavourable risk-reward profile.
The brokerage projects Bharti Hexacom’s net debt (excluding leases) will be zero by FY27 and expects dividends to rise from Rs 10 per share in FY25 to Rs 30 in FY27. ARPU (Average Revenue Per User) is estimated to increase from Rs 242 in FY25 to Rs 284 by FY27, driven by a likely tariff hike in December 2025. Post-FY28, ARPU is forecast to grow at a 5.5% CAGR, while revenue and EBITDA growth are expected to moderate to around 7%.
Despite strong execution and premiumisation, the firm flagged concerns over Bharti Hexacom’s limited geographic spread, which could cap growth. The government’s 15% stake remains an overhang, especially with no board representation and past objections around the Indus Towers deal.
It also cautioned that potential corporate actions such as stake divestments could weigh on valuations. A possible merger with Bharti Airtel was flagged as a structural tail risk, with the risk of an unfavourable swap ratio due to elevated valuations.
Bharti Hexacom is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. It offers services under the brand 'Airtel'.
On a standalone basis, net profit of Bharti Hexacom surged 110.42% to Rs 468.40 crore while net sales rose 22.54% to Rs 2289 crore in Q4 March 2025 over Q4 March 2024.