Bharti Airtel’s Cash Flows Will Grow for 2 years: Moody’s

Moody's Investors Service improved Bharti Airtel's rating to Baa3 and changed the outlook from positive to'stable.' “Bharti’s Baa3 rating considers the company's position as one of the largest telecom service operators globally in terms of subscribers (491 million), its solid market position in India's high-growth mobile market and its large spectrum holdings,” said the rating agency.

Positives include the telecom operator's two-fold increase in March quarter net profit at 2,008 crore, which was boosted by increased average revenue per user and an unusual gain. Furthermore, Moody's anticipates a 15%-20% increase in Bharti's consolidated pre-tax earnings by the end of fiscal 2023, indicating sustained development at its Indian and African divisions.

Airtel has gone a long way since losing 12,364 crore ($1.5 billion) in FY20 to making a profit of 8,305 crore ($1 billion) in FY21. Entities with a Baa3 rating are considered medium grade, have a moderate credit risk, and have an acceptable ability to repay short-term obligations.

Even after spending for purchasing the 5G spectrum, the rating agency forecasts Bharti Airtel's profitability to improve with increased cash flows over the next 1-2 years. This is supported by the telecom operator's calculated measures to progressively raise tariffs.