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3G and international operations to drive Bharti Airtel net

Bharti has announced capital expenditure of around $800 million in Africa and is expected to announce a new branding for its operations in the continent shortly. This capex and increasing domestic competition have impacted its earnings

Stiff competition at home and the increased tax rate in its newly-acquired entity in Africa saw leading private telecom operator Bharti Airtel posting a 26.53% dip in its net profit for the second quarter ending 30th September, at Rs1,661.2 crore.

Bharti's results included its new African operations that it acquired in June from Kuwaiti telecom group Zain for $9 billion to become the world's fifth-biggest mobile operator.

Its net profit fell to Rs1,661.2 crore under the international accounting standards for the second quarter ended 30th September, from Rs2,263 crore in the same period a year earlier.

The firm's profits were also hit by a higher tax rate on an average from its African assets. The effective tax rate in the second quarter increased to 25.5% from 10.6% in the corresponding period last year and 18.1% in the previous June quarter, mainly as a result of taxes in its Africa-based operations.

Despite the dip in profit, the company's total revenue rose by 46.6% to Rs1,52,150 crore from Rs1,03,78 crore in the same period last year, boosted by revenue from its acquisition in Africa. Bharti's last year figures did not include numbers from its Africa operations.

Brokerage firm Religare Capital notes, "Bharti reported Africa revenue/EBITDA of Rs39 billion/Rs9.3 billion with EBITDA margins of 23.9%, below our expectations. On metrics, the performance was good as Bharti added 3.7 million subscribers during the quarter, taking the subscriber base to 40 million, compared to 36 million in the June quarter. ARPUs were flat q-o-q at $7.4 and MOUs grew 9% q-o-q to 112 minutes suggesting first signs of elasticity."

It added that tariff pressures will moderate leading to a pick-up in growth in the Indian market. While investments in Africa would continue over the next two quarters, benefits of outsourcing and growth will be visible over the next one year. Religare suggests that African operations will drive the company's growth in the medium term.

BRICS Securities claims that Bharti's African business was impacted by higher access and interconnect charges, network operations cost, and sales & marketing charges. However, the brokerage maintains a BUY on Bharti Airtel with a target price of Rs380 per share.

Bharti has announced capital expenditure of around $800 million in Africa and is expected to announce a new branding for the Africa operations shortly. The margins in Africa are still low, Manoj Kohli, CEO of Bharti's international operations said, adding that he hopes to improve them by next year.

The telecom major expects to launch third generation (3G) services in India by the end of this calendar year. Bharti paid around Rs12,295 crore for 3G spectrum in 13 of the 22 circles in the country.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security).

 

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Personal finance Thursday

Reliance Life launches Classic ULIP; Birla Sun Life MF unveils Birla Sun Life Fixed Term Plan-Series CH; HDFC Mutual Fund floats HDFC FMP 370D November 2010 (2); Reliance MF introduces Reliance Fixed Horizon Fund-XVI-Series 3

Reliance Life launches Classic ULIP

Reliance Life Insurance has launched a new unit-linked insurance plan (ULIP) called Reliance Life Insurance Classic Plan. The new ULIP will provide policyholders the benefits of regular savings with enhanced protection and market-linked returns. The plan would provide protection to policyholders in the age group of 7-65 years.

The plan offers liquidity through partial withdrawals and loans, top-up payment option and rider benefits to enhance protection cover. It offers multiple benefits and protection from helping policyholders plan their finances wisely at different stages of life, to providing risk cover on loss of life.

Under the plan, the beneficiary would get double the base sum assured plus total fund value in the event of accidental death. The plan is available under regular and single premium minimum payment options. Under the regular option, the customers would have to pay Rs20,000 annually. For the single premium option, customers will have to pay a minimum of Rs50,000 only once at the inception during the 15-year policy tenure.

The plan offers liquidity through partial withdrawals after fifth policy anniversary, loan after the completion of second policy year and top-up option to increase regular savings.

Birla Sun Life MF unveils Birla Sun Life Fixed Term Plan-Series CH

Birla Sun Life Mutual Fund has launched Birla Sun Life Fixed Term Plan-Series CH, a close ended income scheme.

The scheme seeks to generate income by investing in fixed-income securities maturing on or before the duration of the scheme. The scheme will have duration of 457 days from the date of allotment. The scheme will have growth and dividend (payout) option.

During the new fund offer (NFO), the units will be available at Rs10 per unit. The NFO opens on 10th November and closes on 12th November. The minimum investment amount is Rs5,000. The exit load for the scheme is nil.

CRISIL Short Term Bond Fund Index is the benchmark index. Kaustubh Gupta is the fund manager.

HDFC Mutual Fund floats HDFC FMP 370D November 2010 (2)

HDFC Mutual Fund has launched HDFC FMP 370D November 2010 (2), a close-ended income scheme.

The investment objective of the plan under the scheme is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the respective plan.

During the new fund offer (NFO), the units will be available at Rs10 per unit. The scheme closes on 22nd November. The minimum investment amount is Rs5,000.
CRISIL Short Term Bond Fund Index is the benchmark index. The plan shall be managed by Bharat Pareek and Miten Lathia.

Reliance MF introduces Reliance Fixed Horizon Fund-XVI-Series 3

Reliance Mutual Fund has introduced Reliance Fixed Horizon Fund-XVI-Series 3, a close-ended income scheme.

The primary investment objective of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified portfolio of central and state government securities and other fixed income/debt securities normally maturing in line with the time profile of the scheme with the objective of limiting interest rate volatility. The tenor of the scheme is 369 days.

The scheme will have growth and dividend (payout) option. During the new fund offer (NFO), the units will be available at Rs10 per unit. The NFO opens on 11th November and closes on 16th November. The exit load for the scheme is nil. The minimum investment amount is Rs5,000.

CRISIL Short Term Bond Fund Index is the benchmark index. The scheme shall be managed by Amit Tripathi.

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Govt to decide on SBI’s rights issue within a fortnight

New Delhi/Mumbai: The government today said it will take a call within a fortnight on whether State Bank of India (SBI) should be allowed to go for the rights issue, which is expected to be in the range of Rs18,000-Rs21,000 crore, less than the original estimate, reports PTI.

"We are number crunching that (SBI proposal of Rs20,000 crore rights issue) at this point of time. I think some decision would be taken perhaps in next 15 days," financial services secretary R Gopalan said on the sidelines of an event by consultant Skoch here.

He said the presumptions under which the additional requirement has been asked for are being looked into by the government.

"So, amount in any case is dependent on what we arrive at along with SBI. As to how valid those presumptions are, so that exercise is on at this point of time," Mr Gopalan said.

"So once that is there, the next question is what form we will be doing it. That is also being discussed with SBI," he added.

The government holds about 59% stake in SBI. If it clears the proposal, the government will have to subscribe the issue to the extent of its holding, so as to maintain its stakeholding at the existing level.

Depending on the decision taken, Mr Gopalan said there could be implications on the budget.

"There can be implications on budget or it can be neutral on budget, so we will take a view," he said.

If the government decides to subscribe to the rights issue in cash, it will have to go for additional expenditure.

However, if it decides to subscribe the issue through bonds, the effect may be felt later. The decision will be taken in the current fiscal.

However, disbursement can be made either during this fiscal or next fiscal subject to the decision made, Mr Gopalan said.

SBI exuded confidence that rights issue will happen this fiscal.

"I expect the approvals from the govt to come this month and the issue will definitely come out this fiscal," SBI chairman O P Bhatt said in Mumbai.

He said the government has accepted that SBI needs capital.

"We had asked for a rights issue of Rs24,000 crore, but as the government will have to contribute around Rs12,000 cr ...

There's a budgetary process involved, starting with due diligence and other studies, which are being carried out. The final issue size would be around Rs18-Rs21,000 crore," Mr Bhatt told reporters on the sidelines of international banking and finance conference.

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