S&P upgrades Bharti Airtel to 'BBB+', expects capex to rise 25% to ₹56,500 crore by FY28

Bharti Airtel is expected to step up investments in new growth areas over the next two years, with capital expenditure projected to rise 25% to around ₹56,500 crore by FY28 from ₹45,200 crore in FY26, according to S&P Global Ratings.

The ratings agency said the telecom major will increase spending to support new growth drivers, including data centres through Nxtra, cloud services, financial services, and its African operations. Despite the higher investments, S&P expects Airtel's improving earnings and cash flows to support continued deleveraging.

On Wednesday, S&P upgraded Bharti Airtel's long-term issuer credit rating to 'BBB+' from 'BBB'. It also raised the rating on the company's senior unsecured debt to 'BBB+' and assigned a stable outlook.

"The stable outlook reflects our view that Bharti Airtel will pay down debt as earnings and cash flows rise, while maintaining a supportive leverage tolerance for the 'BBB+' rating over the next 12-24 months," S&P said.

India and Africa to drive growth

According to the ratings agency, rising data consumption, premiumisation of telecom services and subscriber additions will continue to support Airtel's earnings growth.

In India, S&P expects Airtel's subscriber base to expand by 3-4% annually, while average revenue per user (ARPU) is projected to increase by 5-7% over the next year.

"A fundamental improvement in the Indian and African telecom markets will help expand Bharti Airtel's earnings," S&P said.

The agency expects Airtel's African business to outperform its India operations over the next two years. It forecasts the African subscriber base to grow by 9-11% annually, while ARPU in Africa is expected to increase by 5-7% annually in U.S. dollar terms through FY28.

S&P projects Airtel's consolidated EBITDA to grow by 8-10% annually over the next two fiscals, after registering a 28% increase in FY26. Africa's contribution to consolidated EBITDA is expected to rise to 25-27% by FY28 from around 20% earlier.

Strong cash flows to support deleveraging

Despite rising capital expenditure and higher shareholder payouts, S&P believes Airtel's operating performance will provide sufficient financial flexibility.

The agency expects dividend payments to increase to about ₹23,000 crore in FY27 and ₹35,000 crore in FY28.

Even after these investments and payouts, Airtel is projected to generate annual adjusted discretionary cash flows of ₹22,000-24,000 crore through FY28.

S&P estimates the company's funds from operations (FFO)-to-debt ratio will improve to 50-52% in FY27 and approach 60% in FY28, compared with an estimated 43.8% in FY26.

"Strong discretionary cash flow will drive further deleveraging," the agency noted, adding that Airtel could pursue acquisitions or enhance shareholder returns while maintaining adequate rating headroom.

S&P also highlighted debt at promoter holding company Bharti Telecom as an area to monitor. The holding company carries debt primarily used to acquire Airtel shares and partly depends on dividends from Airtel to service its obligations.

On Monday, shares of Bharti Airtel closed at ₹1,877, down 1.27%, giving the telecom major a market capitalisation of ₹11.43 lakh crore.

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