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    Bharti Hexacom Limited

    BHARTIHEXA
    Telecommunication·7 Feb 2025
    Management Summary

    Bharti Hexacom delivered a strong Q3 FY25, reporting a 7.3% sequential revenue growth to ₹2251 Crores and a 5.7% ARPU increase to ₹241. The company achieved a 53% EBITDA margin, improving by nearly 300 basis points, and generated ₹758 Crores in operating free cash flow. Net debt to EBITDAaL improved to 1.03, and management discussed the strategic transfer of 3400 towers to Indus Towers, anticipating marginal EBITDA dilution but no material net income impact.

    Highlights

    5

    • Revenue of ₹2251 Crores, growing sequentially by 7.3%.

    • ARPU grew by 5.7% to reach ₹241.

    • EBITDA at ₹1194 Crores with a margin of 53%, improving by almost 300 bps.

    • Net debt to EBITDAaL improved significantly to 1.03.

    • Operating free cash flow (EBITDAaL minus capex) was robust at ₹758 Crores.

    Concerns

    2

    • Planned transfer of 3400 towers to Indus Towers will cause 'some dilution in the EBITDA', though expected to be marginal.

    • A one-time exceptional charge of ₹1.4 billion was recorded, though it was non-cash and non-recurring.

    What Changed2

    vs Q4 FY25

    Guidance items4 → 1 (-3)Risks discussed1 → 2 (+1)

    Key financials

    Single quarter

    12 metrics
    1. 01Revenue₹2,251 Cr+7.3%QoQ
    2. 02ARPU₹241+5.7%QoQ
    3. 03EBITDA₹1,194 Cr
    4. 04EBITDA Margin53%
    5. 05EBITDAaL₹1,042 Cr

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    1.0x EBITDA

    M&A

    Indus Towers

    divestment · announced

    Liquidity

    Liquidity disclosed

    Robust operating free cash flow of ₹758 Crores. Cash inflow from tower transfer will further reduce debt or support investments.

    Guidance & targets

    1
    CategoryTargetPriority
    Capex
    Capex for FWA rollout
    marginal increase
    		Medium

    What to watch in Q4 FY25

    3

    Financial impact of tower transfer

    next quarter
    CurrentExpected 'marginal dilution in EBITDA' and 'not material' impact on net income
    TargetQuantified impact on EBITDA and P&L post-transfer

    Why it matters

    To verify the actual financial implications of the significant asset transfer to Indus Towers on Bharti Hexacom's profitability metrics.

    from EBITDA point of view there will be some dilution in the EBITDA. Consequent to the incremental IP fee, you see the energy will remain the same there is no difference; the O&M will remain the same. There will be some IP fees because there will be some return which will be taken by Indus on the investment; to that extent EBITDA will get very marginally diluted, but that will be very small and what I am trying to say is whatever is there has an impact will get unwound, because this money will help us in either investing or paring down our debt on spectrum or otherwise, so at a net income level we would not be materially different from what we are seeing.

    Risks & concerns

    2
    RiskSeverity

    EBITDA dilution from tower transfer

    Transfer of 3400 towers to Indus Towers will cause 'some dilution in the EBITDA' due to incremental IP fees, but it is expected to be 'very marginal' and 'small'. — Management acknowledged

    low

    One-time exceptional charge

    A ₹1.4 billion exceptional charge was recorded due to a periodic review of assets/liabilities and court judgment reversals; it is a non-cash, one-time decision and not a recurring trend. — Management acknowledged

    low

    Q&A highlights

    7

    “at net income level, there would not be much of a difference, because of course we will be receiving some consideration, which has an opportunity cost... should not be very material to the overall P&L. ... from EBITDA point of view there will be some dilution in the EBITDA. Consequent to the incremental IP fee... EBITDA will get very marginally diluted, but that will be very small.”

    Clarifies the expected financial implications (marginal EBITDA dilution, no material net income impact) of a significant asset transfer for Bharti Hexacom.

    asked by Mr. Vivekanand Subbaraman

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q3 FY25 Financial Performance

    Bharti Hexacom delivered robust financial results in Q3 FY25, with revenue reaching ₹2251 Crores, marking a sequential growth of 7.3%. The company's ARPU saw a healthy increase of 5.7% to ₹241, reflecting strong monetization efforts. EBITDA stood at ₹1194 Crores, achieving a margin of 53% and improving by nearly 300 basis points, while EBITDAaL was ₹1042 Crores with a 46.3% margin. Net income for the quarter was ₹261 Crores.

    02

    Improved Debt Profile and Cash Generation

    The company demonstrated strong financial prudence, with its net debt to EBITDAaL ratio improving significantly to 1.03. Operating free cash flow, calculated as EBITDAaL minus capex, was robust at ₹758 Crores. This strong cash generation and deleveraging trajectory position the company well for future investments and potential shareholder returns, with management indicating that dividend payout will be 'certainly looked at with a positive angle'.

    03

    Strategic Tower Transfer to Indus Towers

    Bharti Hexacom plans to transfer approximately 3400 telecom towers to Indus Towers, a move expected to enhance operational and financial efficiency and free up management bandwidth. While this transaction is anticipated to cause 'some dilution in the EBITDA' due to incremental IP fees, management stated the impact would be 'very marginal' and 'small', with no material effect on net income. The cash inflow from this transfer is expected to support further investments or debt reduction.

    04

    Growth in Home Broadband and FWA Segment

    The company reported strong customer additions, with 4.5 lakh smartphone customer additions and 4.94 lakh net customer additions, and churn improving to 1.9% from 3.2% last quarter. In the home broadband segment, Bharti Hexacom currently has 2 million home passes and is present in about 200 cities, targeting an addressable market of 3-4 million. The FWA rollout is expected to drive further growth in this segment, with capex for FWA potentially seeing a 'marginal increase' due to more expensive CPEs.

    05

    One-Time Exceptional Charge Recorded

    Bharti Hexacom recorded a one-time📎 exceptional charge📎 of ₹1.4 billion in Q3 FY25. Management clarified that this charge resulted from a periodic review of the carrying value of various assets and liabilities, combined with reversals related to a recent court judgment on passive infrastructure. It was emphasized that this was a non-cash payout and a 'onetime decision', thus not indicative of a recurring trend or ongoing operational issue.

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