You can buy Bharti as an exposure to the telecom space in India but you must not expect any great returns in the next one year. If you look at the fourth quarter numbers of Bharti Airtel, the total revenues are down and the profits are also under pressure. The only good that has happened to Bharti in the fourth quarter is that the Average Revenue per user (ARPU) has gone up sharply by 19% to Rs.123/-. While this is much better than the ARPU a few months, it is still not a level that is enough to make consistent profits. In terms of number of subscribers, Bharti has dropped to third place behind Vodafone-idea and Reliance Jio at the national level. In the last few months Airtel had weeded a large number of its low revenue customers and that had helped improve the ARPU. But that advantage may have played out and that is not going to be available to you any longer. The full year profits at Rs.410 crore are half of the previous year.

There are a few essential challenges for the company. It has a net profit margin of 5% which automatically puts a cap on its valuations. Bharti has total debt of Rs.1.09 trillion and that means the financials of the company will always be under pressure. The only good thing going for Airtel is that the Indian market has now got split between just 3 companies’ viz. Vodafone-Idea, Reliance Jio and Bharti Airtel. Thus price wars are likely to be less intense in the coming months and that should work I favour of Airtel. Also, the company has a very strong Africa franchise which it is likely to monetize but that will show up more in the long term. For the short term, the upsides on the stock may be capped.