Bharti Infratel (BIL), with strong free cash flow generation, a low risk annuity business model and expected high tenancy growth, owing to the already commenced data revolution, we believe Bharti Infratel is on a strong footing, going forward, says ICICIdirect.
"Bharti Infratel (BIL) is the market leader in the tower sharing space with a portfolio of about 84,303 towers (36381 towers at the standalone level and 47922 towers via 42% stake in Indus). Though the tower growth has been in the range of 1-4% in the past years, revenues, EBITDA and PAT have grown at 11.5%, 16.6% and 59.0% CAGR respectively, in FY10-14. The growth has been aided by the increase in tenancies from 1.90x in FY12 to about 2.01x in FY14, which lends high operating leverage. The company also has the top three telecom service providers as its anchor tenants. With the impending launch of Reliance Jio's services and a ramp up in data offerings by existing operators, demand for additional tenancy is bound to increase. BIL generates about Rs 1767.7 crore free cash flow each year and has stated a dividend policy of distributing 60-80% of its standalone profits or 100% of interest dividend, whichever is higher. The company is also open to growing by inorganic expansion an when there is a suitable opportunity. With strong free cash flow generation, a low risk annuity business model and expected high tenancy growth, owing to the already commenced data revolution, we believe Bharti Infratel is on a strong footing, going forward."
"The company has now adopted a strong dividend policy by committing to distribute as much as 60-80% of its standalone profit or 100% of interest dividend, whichever is higher. The distribution of Rs 4.4/share as dividend in FY14 and an announcement of Rs 4.5/share (represents the Indus dividend received by BIL) gives credence to its stated policy and also suggests an improvement in the return ratios, going ahead", says ICICIdirect.com research report.
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