Bharti Airtel’s Stake Sale: A Discounted Entry Point in India’s 5G Future

The recent $1.54 billion stake sale by Singtel in Bharti Airtel has sparked a critical question: Is this a signal that India’s telecom giant is trading at a discount to its true potential? The transaction, which saw Singtel offload a 0.8% stake at a 3.6% discount to Bharti’s market price, offers a rare window into investor sentiment about the sector’s valuation dynamics. Amid regulatory shifts, 5G rollouts, and fierce competition, the move could mark a strategic opportunity to capitalize on undervalued assets—or a warning of lingering risks. Here’s why the former might be the case.

The Stake Sale: A Discounted Exit or a Vote of Confidence?

Singtel’s decision to reduce its Bharti stake from 12% to 11.2% has been interpreted by some as a retreat from India. Yet, the math suggests otherwise. The sale price implies a valuation of ₹10.64 trillion, which aligns with Bharti’s current market cap. Analysts, however, see an upside of 6% to Bharti’s shares, with a target price of ₹1,976. This implies the Singtel transaction might reflect opportunistic capital reallocation rather than doubt about Bharti’s prospects.

The strategic rationale? Singtel has long prioritized core markets like Singapore and Australia. By trimming its stake in Bharti, it may be freeing capital for 5G investments in its home markets or other high-growth sectors. For Bharti, losing a minority shareholder won’t dilute its focus on India’s $2.5 trillion digital economy opportunity.

Valuation Metrics: Bharti’s Undervalued Edge

To assess whether Bharti is undervalued, we must compare it to peers and sector benchmarks.

Key metrics:
- Bharti’s EV/EBITDA multiple: 16.04 (FY24) vs. Jio’s implied ~11.0 after valuation cuts.
- Profitability: Bharti’s Q4 FY25 net profit rose 24.5% YoY to ₹6,642 crore, while Jio’s EBITDA margins dipped to 52.8% amid rising costs.
- Free cash flow: Bharti generated ₹292 billion in the first nine months of FY25, with projections of ₹570 billion by FY27—far outpacing Jio’s slower cash flow growth.

Bharti’s strong free cash flow trajectory and deleveraged balance sheet (net debt of ₹392 billion post-spectrum payments) contrast sharply with Jio’s cost pressures and Vi’s debt-ridden model. At 57.6% EBITDA margins (per ICICI Securities), Bharti’s efficiency edge is clear.

The Sector’s Regulatory Crossroads: 5G as a Catalyst

India’s telecom sector is at an inflection point. The Supreme Court’s 2019 AGR ruling, which forced operators to pay ₹92,000 crore in dues, is now largely behind Bharti (which has repaid ₹670 billion in spectrum obligations). Meanwhile, 5G is the new battleground.

• Market share: Bharti’s ARPU of ₹245/month vs. Jio’s ₹203/month reflects its premium service strategy.
• 5G rollout: Bharti has covered most districts with 5G, trailing Jio’s 191 million subs but gaining momentum. Its FWA (Fixed Wireless Access) expansion targets underserved rural markets, a $10 billion+ opportunity.
• Regulatory tailwinds: The government’s push for 5G-enabled smart cities and IoT could amplify Bharti’s enterprise revenue, which now accounts for 20% of its business.

Why This Is a Tactical Buy Moment

The Singtel stake sale’s discount to market price is a red herring. Bharti’s fundamentals—profit growth, cash flow, and 5G leadership—suggest it’s undervalued relative to its peers. Here’s why investors should act now:

1. Sector consolidation is inevitable: With Vi’s debt at ₹36,950 crore and Jio’s 5G costs rising, Bharti is best positioned to capitalize on M&A opportunities. Its strong balance sheet could let it acquire distressed assets at bargain prices.
2. 5G monetization is underappreciated: Analysts project Bharti’s 5G data plans and enterprise services to drive 17% revenue growth annually—far beyond the sector’s 8% average.
3. Valuation upside: At a 33.34 P/E (vs. Jio’s ~20), Bharti is priced for perfection. But with a 6% upside to analyst targets and free cash flow set to double by 2027, the stock is a buy.

Risks on the Horizon

No opportunity is risk-free. Bharti faces:
- Competitive pricing wars: Jio’s 5G rollout could pressure ARPU.
- Regulatory surprises: Spectrum auctions or new AGR liabilities could disrupt cash flow.
- Execution risk: Scaling FWA and enterprise services requires flawless execution.

Conclusion: The 5G Discount Won’t Last

The Singtel stake sale isn’t a vote of no confidence—it’s a tactical reallocation in a sector ripe for consolidation. Bharti’s superior free cash flow, debt-free profile, and leadership in India’s 5G transformation make it a rare telecom stock with both growth and value attributes.

The market is pricing in risks, but not the rewards. With a 6% upside embedded in analyst targets and 5G adoption accelerating, now is the time to buy Bharti Airtel—before the sector’s next wave of consolidation pushes its valuation higher.