Bharti Airtel: Three reasons behind four-session-long rally

Share of Bharti Airtel, the country’s second-largest mobile network operator, has rallied 7.5% over the last four sessions and is trading close to its 52-week high amid a slew of positive developments. Extending its gaining streak, the telecom stock gained more than 4% in an intraday trade today after it updated stock exchanges about the acquisition of Vodafone Group's stake in Indus Towers.

On Tuesday, Bharti Airtel opened higher for the fourth straight session and rose as much as 4.02% to hit a high of ₹762.85 on the BSE. On the volume front, there was a surge in buying activity as 3.88 lakh shares worth ₹29.12 crore changed hands over the counter, compared to the two-week average volume of 2.14 lakh shares. The company's market capitalisation rose to ₹4.12 lakh crore.

The stock is trading 2.4% lower than its 52-week high of ₹781.90 touched on November 24, 2021. It hit a 52-week low of ₹504.99 on April 1, 2021. Bharti Airtel shares have delivered 44% returns in one year, 10% in a month, and 9% since the beginning of the calendar year 2022.

Here are key factors that boosted stock performance:

Stake buying in Indus Towers

The Sunil Mittal-led company has acquired a 4.7% stake in Indus Towers from U.K.'s Vodafone Group for around ₹2,388 crore. Last month, the company had inked a pact to buy Vodafone's stake in Indus Towers on “the principal condition that the amount paid shall be inducted by Vodafone as fresh equity in Vodafone Idea Limited (VIL) and simultaneously remitted to Indus Towers to clear VIL’s outstanding dues”.

“The company, along with its wholly-owned subsidiary, Nettle Infrastructure Investments, has acquired has acquired 127,105,179 equity shares (around 4.7%) of Indus Towers Limited at ₹187.88 per share from Euro Pacific Securities Ltd., an affiliate of Vodafone Group Plc,” Bharti Airtel said in a filing today.

Acquiring stake in Avaada KNShorapur

Last week, the telco entered into an agreement for buying 7.04% equity stake in Avaada KNShorapur Private Limited for cash consideration of ₹1.74 crore. Avaada KNShorapur is a special purpose vehicle (SPV) formed for the purpose of developing, executing, managing and running up to 10 MW solar power generation plants in the state of Karnataka.

Broker’s bullish outlook

Bharti Airtel hosted an analyst meet on March 25 to outline its growth plans and opportunities. The management remained confident of sustaining strong revenue growth in mobile business and anticipates acceleration in non-mobile revenue growth in coming years. While digital business remains core for growth across both consumer and enterprise segments, the company plans monetisation of its payment bank and data centre businesses in the future to unlock new business opportunities.

Following the analyst meet, Motilal Oswal recommended a buy rating on the telecom stock with a target price of ₹910, an upside of 19% from the today’s intraday high.

Analysts at ICICI Securities also maintained a buy rating with a target price of ₹733 in a research report dated March 28.