bharti airtel: MFs raise holdings in Bharti Airtel as business prospects brighten for telco

The rising probability of a duopoly in the domestic telecom market has prompted mutual funds to prefer a direct exposure to the sector instead of a proxy play through petroleum refining giant Reliance Industries (RIL), which has invested heavily in its telecom venture Jio.

Fund managers added a sizeable quantity of Bharti Airtel’s shares to their portfolios while marginally lowering their stake in RIL. The holding of the domestic funds in Bharti Airtel rose to 9.3 per cent in the December 2019 quarter, the highest in the past decade and twice that of 4.2 per cent in 2011. Their holding in RIL dropped by 10 basis points to 5.1 per cent, according to data compiled by ETIG from Capitaline.

The local funds have been buying Bharti Airtel for the last three quarters. They invested around Rs 5,600 crore in the company in January 2020 alone. The holding of the telecom stocks in domestic funds reached 2.4 per cent in January 2020, a record high.

A major reason for the fund managers’ changing stance towards a direct exposure to the sector is the rising attractiveness of Bharti given diminishing competitive intensity and the company’s ability to raise fresh capital. It recently raised $3 billion from the institutions to pay the dues related to adjusted gross revenue. It has also provisioned for about 73 per cent of the total liabilities.

In addition, the sector revenue has been showing signs of recovery since the March 2019 quarter. It grew by 3.3 per cent in the September quarter to Rs 37,338 crore. Over half of the top 20 funds were overweight on the telecom sector in January 2020. ICICI Prudential and Franklin Templeton have weights of 6.2 per cent and 5 per cent to telecom compared with the sector’s weight of 1.9 per cent in the BSE 200 index according to a report by Motialal Oswal Financial Services.