ICICI Securities initiates coverage on Bharti Hexacom, calls it the ‘little giant’

“We assign a 15% premium to Bharti India’s valuations, capturing our hypothesis of ‘small, but beautiful’ for BHL. BHL is small as it caters only 7% of the mobile market, and is part of Bharti Airtel’s (Bharti) larger ecosystem. ‘But, beautiful’ as company structure allows it to have a superior capital structure, which indeed results in higher return ratios, and ‘higher for longer’ growth profile,” said Sanjesh Jain, analyst at ICICI Securities.

Bharti continues to increase its rural presence, which the brokerage believes could help BHL grab more , while it conservatively factors in stable share. Hexacom brings with it multiple advantages of pan-India network sharing, asset-light setup (as it leases fiber from Bhart), capex efficiencies and cost sharing.

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However, Bharat Hexacom has certain risks on the downside as stated by ICICI. The company has a higher concentration of revenue from one circle in Rajasthan and both Rajasthan and Northeast circles have higher geo-political and socio-political risks. Lower-than-expected tariff hikes and market share coupled with unfavourable regulatory policies could also pose risks to company growth.

The shares of BHL got listed on the exchanges in April, which had an upper price band of Rs 570. The stock has gained 33% since its listing at Rs 755.

The stock was trading nearly 6% higher at Rs 1,019 on the BSE around 1:30 pm.

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