Bharti India's largest mobile operator, fell to its lowest level in more than two years in Mumbai trading after brokerages including Goldman Sachs Group Inc. downgraded the company on concerns about rising expenses.
Bharti fell as much as 4.7 percent to 261.40 rupees, the lowest intraday level since July 2010, and changed hands at 263.60 rupees as of 10:05 a.m. The stock was the biggest loser on the benchmark Sensitive Index (SENSEX), which rose 0.3 percent. The New Delhi-based phone operator plunged 6.6 percent yesterday after reporting earnings that missed analysts’ estimates.
Goldman Sachs and Standard Chartered Plc cut their ratings on expectation the company will have to boost promotion costs as it seeks to grow market share in India and Africa. Bharti, controlled by billionaire Chairman Sunil Mittal, said yesterday that telecommunications revenue in India were depressed because of “hyper-competition” and higher network costs.
“The disappointment was more on costs, than on revenue,” Standard Chartered analysts Rahul Singh and Saurav Anand said in a note dated yesterday. The bank lowered its rating to in-line from outperform and reduced the price target to 274.35 rupees from 300 rupees.
Bharti’s profit will see an impact from competition for the next 12 to 15 months, compared with the six to nine months predicted earlier, the analysts wrote in the note.
Price cuts and promotions offered by the company to maintain and regain market share in India will spur “aggressive responses” from competitors, wrote Sachin Salgaonkar, an analyst at Goldman Sachs, in a note to clients yesterday. He cut his rating to neutral from buy, adding that Bharti’s “aggressive spend” will affect its Ebitda margins and profitability.
Bloomberg news
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