Bharti Airtel’s share price gained nearly 2 per cent to hit an intraday high of Rs 1,876 apiece after Nomura retained the stock as its top pick in the telecom sector. The brokerage noted that the company’s current valuation fails to reflect its superior operating metrics, strong free cash flow generation and multiple growth opportunities. The brokerage has reiterated its ‘Buy’ rating on the stock and raised its target price to Rs 2,355 from Rs 2,220.
According to Nomura, “the implied valuation discount versus Jio is unwarranted”, especially given Airtel’s stronger profitability profile and higher average revenue per user. The brokerage described the company as an “ARPU compounder with multiple optionalities” and a “premium telco play with tariff boost and solid FCF generation.”
Nomura expects Airtel to be among the key beneficiaries of India’s consolidated three-player telecom market. With the bulk of the 5G rollout now completed and capital expenditure intensity moving past its peak, the brokerage believes the company is entering a phase of improving cash generation and balance-sheet strengthening.
“We believe the resulting strong FCF generation is playing out into a deleveraging cycle,” Nomura said. It expects Airtel to deliver 14 per cent CAGR in both EBITDA and free cash flow between FY26 and FY29, supported by a likely tariff increase in the third quarter of FY27, operating leverage and continued premiumisation of its subscriber base.
A key pillar of Nomura’s investment thesis is Airtel’s valuation relative to Reliance Jio. After adjusting Airtel’s market capitalisation for the value of its holdings in Africa, Indus Towers and Nxtra, the brokerage estimates that the implied valuation of the India telecom business stands at 9.3 times FY28 EV/EBITDA, significantly below the around 12.2 times multiple implied by Jio’s valuation.
“This is despite Airtel recording a higher ARPU (Rs 257 versus about Rs 214 for Jio in FY26), better margins and stronger free cash flow,” Nomura said. “A premium operator priced at a discount to its main rival, in our view, is unwarranted, providing reasonable upside potential.”
Nomura also pushed back against comparisons between Indian telecom operators and global telecom peers, arguing that the domestic market structure justifies higher valuation multiples.
“We believe that Bharti’s valuation premium is justified due to its long-term ARPU growth potential, favourable market structure with two strong players with combined 76 per cent subscriber market share in FY26, multiple growth adjacencies, and the absence of digital alternatives for India investment,” the brokerage said.
For the India mobility business, Nomura estimates an ARPU growth CAGR of around 9 per cent between FY26 and FY29. While its EBITDA projections for FY27-29 remain largely unchanged, the brokerage has fine-tuned some assumptions and continues to see a favourable long-term outlook.
“We reiterate Buy with a slightly higher SOTP-based target price of Rs 2,355,” Nomura said, adding that Airtel currently trades at 8.4 times FY28 EV/EBITDA and 7.2 times FY29 EV/EBITDA.
The brokerage believes those multiples remain attractive for a company capable of delivering double-digit growth in both earnings and cash flows. “Bharti trades at levels which we think are attractive for a business with 14 per cent EBITDA and 14 per cent operating FCF CAGR and multiple optionalities,” Nomura said.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
