Bharti Hexacom shares fall 3.5% after Motilal Oswal downgrade

Hans India

07-06-2025

Mumbai: Bharti Hexacom's shares dropped over 3.5 per cent to Rs1,810 on Friday during the intra-day trading session on the National Stock Exchange (NSE), after brokerage firm Motilal Oswal downgraded the stock from a 'Buy' to a 'Neutral' rating and set a target price of Rs1,900.
The brokerage said the downgrade was mainly due to the stock's high valuation, which is currently around 40 per cent more expensive than Bharti Airtel.
'Risk-reward no longer attractive; downgrade to Neutral,' said the brokerage.
Motilal Oswal believes this makes the risk-reward profile less attractive for investors, even though the company continues to show strong performance and growth through premium services.
It expects Bharti Hexacom to become debt-free (excluding lease liabilities) by the financial year 2027.
The brokerage also predicts that the company's dividend will rise from Rs10 per share in FY25 to Rs30 per share by FY27.
The average revenue per user (ARPU) is expected to go up from Rs242 in FY25 to Rs284 by FY27, supported by a likely tariff hike in December 2025.
Beyond FY28, the brokerage expects ARPU to grow at a slower rate of 5.5 per cent annually, while overall revenue and EBITDA growth may settle around 7 per cent.
However, the firm added that any significant boost in valuation will depend on ARPU growing faster than expected.
Motilal Oswal also flagged some concerns. Bharti Hexacom's operations are concentrated in a few telecom circles, which could limit further growth.
Additionally, the government still holds a 15 per cent stake in the company, and this is seen as a risk factor -- especially because the government lacks board representation and had earlier raised objections related to the Indus Towers deal, the brokerage said.
The brokerage also mentioned that any potential corporate moves, such as stake sales, could put pressure on the stock's valuation.
It further warned that a possible merger with Bharti Airtel could be risky, especially if the share swap ratio turns out to be unfavourable due to Bharti Hexacom's current high valuation.
Around 12:45 pm on Friday, Bharti Hexacom was trading at Rs1,810, down about 3.62 per cent or Rs68.
The stock has still gained 24 per cent so far this year and has jumped 74 per cent over the past 12 months.