Rama Krishna Vadlamudi November 2nd, 2009

In the last one month or so, the stock of Bharti Airtel Limited has attracted investors’
wrath and naturally the stock price has fallen from a level of around Rs 450 to the
present level of a little less than Rs 300 as at the end of October 30th, 2009, giving a
negative return of around 33 per cent to investors. At this point of time, there’s an
intense battle between bulls and bears and they’ve found another stock to beat out of
shape or take it upwards. In the ultimate analysis, who will be the winner? Only time will
tell. But, in the meantime, as investors, what shall we do? Shall we sell/hold the stock or
start accumulating the stock at the current level of Rs 293? I try to answer these
questions in a very brief and lucid matter. Let me make an attempt. In the next page, you’ll
find a “ONE PAGER”. Best of Luck to all! Basically, Bharti Airtel is a GREAT company despite its
attempt at diversification into Africa and other countries. Though investors should be cautious
with all acquisitions and diversifications, the stock on Indian bourses is providing interesting and
compelling options to long-term investors.
(Please don’t forget to read the author’s disclaimer on the second page)

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Photograph: By the author Airtel logo: Company’s website

 STRENGTHS WEAKNESSES

Being a big player and biggest brand, it
can face competition skillfully
With a market share of 25 per cent,
Bharti is a leading & dominant player
Other players can’t match its network
It has got a good management team
This management team will translate
into better customer segmentation
New players cannot match its network
It has huge cash Rs 6,500 crore (30.9.09)
Tariff wars are not new to the biggest
player in India’s Telecom Sector
Its debt-equity ratio is only 0.12
Due to stiff competition, its market share
may be under pressures
The pace of growth has tapered off
Being a market leader, it takes time
to respond to the market threats
As in the case of HindustanUnilever, over
over a period of eight to nine years,
small competitors may nibble away
at Bharti’ market share. However,
the company has shown good
Management skills to face up to the
increasing competition.

THREATS
Growth rate is likely to be under pressure
if not growth per se
Reliance Com to give tough competition
Tata Docomo’s audacious offer of
‘one paise per second’ has taken away
Bharti’s market share
Being heavily regulated, the business
is susceptible to regulatory actions
Global economic slowdown is likely to
affect telecom business
OPPORTUNITIES
Consolidation in the sector to benefit
large players
Subscribers are in general buying new
SIM cards in addition to existing ones
A few days back, Bharti itself launched
its own ‘one paise per second’ plan
The contribution from non-voice segments
is growing at a faster clip
The usage of data services is low, which
may create more opportunities
Bharti Airtel is actively pursuing markets in
Africa and other developing countries

MY TAKE ON BHARTI AIRTEL STOCK

The company’s Price-Earnings Ratio is at around 12.25 at the current market price of Rs 293 as on October
30th, 2009. It price-book value is around 3.19. Its operating profit margin is 42 per cent, which is quite good
in a business with stiff competition. The company has a strong balance sheet and its CASH HOLDING is at
Rs 6,470 crore as on 30.9.09. It’s generating enormous free cash flows net of capital expenditure. It’s in the
best position to leverage its strengths and decimate smaller players in the process. But, it’d take some time
for it to regroup its energies and mount an onslaught on its competitors and consolidation is evitable
ultimately. The company has got the best business model, resources, management team and huge network
to face any kind of competition. Investors with a three-year outlook can consider investing in its equity
shares at the current market price of Rs 293. Small investors should not try to time the market. But, they
should be mentally prepared for a fall of 20/30 per cent from the current level. And they should not worry too
much about the price fluctuations if they want to make safe money in the long-term. By any reckoning, the
current market price offers a good entry point and small investors should start nibbling away at the shares in
instalments at different price levels so that their acquisition cost will be low and reasonable. This stock is
suitable for investors with long-term horizon of at least three years. It’s likely to give long-term decent returns
to investors. If you’re looking for spectacular return in one month or even one year, DON’T BUY THE STOCK.

PLEASE LOOK OUT FOR MY FULL ANALYSIS ON: www.scribd.com/vrk100

AUTHOR’s DISCLAIMER: This should not be construed as a recommendation by me. The author holds a small stake in the
company’s equity shares and as such it’s safe to assume that the author has a vested interest in the stock price and general market
going up. The views of the author are personal. Readers or investors must consult their certified financial advisor before taking
any decision on their equity investments and the investment should be in line with their risk profile & risk appetite and their
general market perception. Any equity investment should be within their overall ASSET ALLOCATION, which is extremely vital.

Rama Krishna Vadlamudi, BKC, Bombay. November 2nd, 2009 Page 2 of 2

Please read the Author’s Disclaimer at the end