Bharti Hexacom Limited — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

Bharti Hexacom delivered a strong FY25, with revenues growing ~21% and EBITDAaL ~27%, driven by operational efficiencies and customer additions. Q4 saw sequential revenue growth and margin expansion, alongside significant debt prepayment. However, the planned tower sale has been delayed, and Q4 ARPU was affected by fewer billing days.

Highlights

  • FY25 revenues grew by ~21% and EBITDAaL by ~27%, with margins expanding to 44.2%.

  • Q4 FY25 revenues grew sequentially by 1.7% to ₹2,289 crores, with EBITDAaL margin improving by 30 bps to 46.6%.

  • Smartphone customer additions in Q4 reached 7.1 lakh, up from 4.5 lakh in the previous quarter.

  • The company prepaid ₹858 crores of high-cost DoT debt in Q4, strengthening its balance sheet.

  • Operating free cash generation for FY25 was strong at ₹2,300 crores, with net debt to EBITDAaL around 1.

Concerns

  • The proposed tower sale to Indus Towers has been put in abeyance, requiring a fresh process.

  • Q4 ARPU of ₹242 was impacted by two fewer days in the quarter.

Key financials

2 periods

Q4

  • Revenue
    ₹2,289 Cr
    QoQ +1.7%
  • ARPU
    ₹242
  • EBITDA
    ₹1,220 Cr
  • EBITDAaL Margin
    46.6%
    QoQ +0.3%
  • Net Income
    ₹468 Cr
  • Operating Free Cash Flow
    ₹641 Cr
  • Smartphone Customer Adds
    7,10,000 subscribers

FY25

  • Revenue Growth
    21%
  • EBITDAaL Growth
    27%
  • EBITDAaL Margin
    44.2%

What they filed

Q1 FY27: revenue up 10.9%, net profit up 23.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,098 2,251 2,289 2,263 2,317 +10%2,360 +5%2,414 +5%2,510 +11%
EBITDA1,002 1,152 1,168 1,161 1,208 +21%1,254 +9%1,267 +8%1,322 +14%
Net profit253 261 468 392 421 +66%474 +82%447 −4%482 +23%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹579 Cr
    Operating free cash flow, that is EBITDAaL minus capex, was about 641 Crores. During Q4, we prepaid 858 Crores of high cost DoT debt pertaining to the 2024 auction. This was at a coupon of about 8.65%.
  • Debt Net ₹3,700 Cr · 1.0× EBITDA Maturity: Remaining spectrum dues for FY2021 and FY2022.
    • Repayment Prepaid high-cost DoT debt pertaining to the 2024 auction at a coupon of 8.65%. ₹858 Cr
    Balance sheet is robust with a net debt excluding leases at about 3700 Crores and our net debt to EBITDAaL around 1. With this, the company is left with only FY2021 and FY2022 spectrum dues.

Guidance & targets

Capex

  • Capex Trajectory Capex · from FY2025 · Medium confidence Downward trend
    the capex trajectory should see a downward move from FY2025.

    — Soumen Ray

Margin

  • EBITDAaL Margins Margin · in future · Medium confidence Improvement
    I think increasingly, we will target to improve our EBITDAaL margins.

    — Soumen Ray

Market Share

  • Premiumization of Customers Market Share · ongoing · Medium confidence Valid job
    the job of premiumization of customers absolutely is valid.

    — Soumen Ray

Technology

  • 5G SA Implementation Technology · Low confidence Some distance away
    we are some distance away and we are not in a race to meet a deadline as to when SA is implemented, whichever part of the country, whether it is any other circle or indeed these two circles, whichever circle, whichever comes closer, there we would do what Gopal mentioned in Airtel call of implementing SA, but as of now, we are quite some distance away across the country including the two circles in Hexacom.

    — Soumen Ray

What to watch in Q1 FY26

Tower sale process resolution

Next quarter
Current Put in abeyance, fresh process to be undertaken
Target New process initiated / resolution announced

Why it matters

Impacts asset monetization and potential cash flow generation for the company.

Before I hand over to Vaidehi, I would like to discuss about the proposed tower sale. As you are aware, we have put the tower sale proposal to Indus Towers in abeyance as TCIL, one of the public sector undertaking and a significant shareholder of Hexacom had requested the company to start a fresh process, which meets the requirement of TCIL as a public sector undertaking.

Risks & concerns

  • Proposed tower sale put in abeyance

    medium

    The tower sale proposal to Indus Towers has been put in abeyance due to a request from TCIL, a significant shareholder, for a fresh process, despite management's conviction in the business logic.

    Management acknowledged

Q&A highlights

3 direct
Seasonality in Rajasthan and relevance of FWA rollout in specific circles. Partial
FWA is a very, very strong offering for us and as a matter of fact, lion's share of homes acquisition in Q4 has been with FWA. It is just the fact that there is no wired broadband in large geographies of these two circles.

Highlights the strategic importance of FWA in specific geographies for home broadband growth and clarifies the impact of growing market share on in-roamer trends.

Asked by Sanjesh Jain

Dividend payout policy and conservatism given comfortable debt levels. Partial
I think this company also, yes its debt is less, but it does not have some of the other engines of growth, which possibly Airtel has. Like what was mentioned in the Airtel call, we will balance between the three, four objectives and we will prudently use the cash that is generated and deploy it as and when required.

Explains management's balanced approach to capital allocation, considering growth engines and remaining spectrum dues, rather than solely focusing on payout ratio.

Asked by Sanjesh Jain

Incremental EBITDAaL margins for FY26 without a tariff hike. Partial
this has been a quarter where our opex has been very low and you must appreciate that there are certain costs, which has increasing trend... I would say, this is not a quarter which is representative. I think, if you look at post tariff like, maybe Q3-Q4, that would be more representative, but I must at the same time tell you that these are very small nuances and I think increasingly, we will target to improve our EBITDAaL margins.

Provides context on Q4 opex being unrepresentative and signals management's expectation for future margin improvement despite no explicit tariff hike guidance.

Asked by Vivekanand Subbaraman

Capex trajectory for FY26. Direct
the capex will come down, like it is happening in Airtel, there is a transport job to be done, but I think the transport job in these two circles is not so much. So, the capex trajectory should see a downward move from FY2025.

Confirms management's expectation for reduced capex in the next fiscal year, impacting future free cash flow.

Asked by Vivekanand Subbaraman

Premiumization strategy in Hexacom circles compared to Bharti Airtel's aggregate level. Direct
the job is the same, but the path that one will follow is different. The postpaid penetration in these two circles is very low... for example, here the focus would be more on data top up as opposed to international roaming.

Clarifies the localized approach to premiumization, adapting to the specific market characteristics of Hexacom's circles.

Asked by Gaurav Malhotra

Acceleration of 5G SA transition for FWA in Hexacom circles. Direct
I do not think we are looking at a target of acceleration. It is a simple function of the capacity of our 5G infrastructure being utilized. Today, there is adequate capacity for us to roll out more FWAs... we are some distance away and we are not in a race to meet a deadline as to when SA is implemented.

Indicates that 5G SA rollout is not being accelerated and is dependent on network capacity utilization, suggesting a measured approach to technology transition.

Asked by Gaurav Malhotra

2 min read 6 chapters

Detailed narrative

Strong FY25 Financial Performance and Margin Expansion

Bharti Hexacom delivered robust financial results for FY25, with revenues growing by approximately 21% and EBITDAaL growth reaching about 27%. The company achieved an impressive EBITDAaL margin of 44.2% for the full year, reflecting strong operational leverage and efficiency gains. This performance underscores the company's ability to drive growth and profitability in a competitive market.

Q4 FY25 Operational Highlights and Customer Growth

In Q4 FY25, Bharti Hexacom reported revenues of ₹2,289 crores, marking a sequential growth of 1.7%. The EBITDAaL for the quarter stood at ₹1,220 crores, with the margin improving by 30 basis points sequentially to 46.6%. The company saw significant customer additions, particularly in smartphones, adding 7.1 lakh new smartphone users, a notable increase from 4.5 lakh in the previous quarter. ARPU for the quarter was ₹242, though management noted it was impacted by two fewer days.

Balance Sheet Strengthening Through Debt Prepayment

Bharti Hexacom continued its focus on balance sheet strength by prepaying ₹858 crores of high-cost DoT debt during Q4 FY25. This debt carried a coupon rate of 8.65%, and its prepayment contributes to a healthier financial position. For the full year FY25, the company's net debt excluding leases stood at approximately ₹3,700 crores, with a net debt to EBITDAaL ratio of around 1. The company now only has spectrum dues remaining for FY2021 and FY2022.

Fixed Wireless Access (FWA) Driving Home Broadband Growth

Fixed Wireless Access (FWA) has emerged as a significant growth driver for Bharti Hexacom, contributing the 'lion's share' of home acquisitions in Q4. This is particularly relevant in geographies where wired broadband infrastructure is less prevalent. Management emphasized that FWA is a 'very, very strong offering' in these areas, enabling the company to expand its market presence and deepen coverage for home broadband services.

Strategic Focus on Premiumization and Future Margin Improvement

Management reiterated its commitment to premiumization, stating that the 'job of premiumization of customers absolutely is valid,' albeit with tailored approaches for Hexacom's specific circles, such as focusing on data top-ups. The company also aims to 'increasingly target to improve our EBITDAaL margins' in future quarters, leveraging operational efficiencies and a projected downward trend in capex from FY25.

Tower Sale Process in Abeyance and Future Steps

The proposed tower sale to Indus Towers has been put in abeyance following a request from TCIL, a significant public sector undertaking and shareholder, for a fresh process. While management remains convinced of the business logic and merit of the proposal, they have agreed to undertake a new exercise in consultation with TCIL. This decision prioritizes corporate governance and transparency, and the company will evaluate the future course of this transaction.

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