In this briefing:
- Bharti Airtel – Performance Is Inflecting at Last. Vodafone IDEA, Not so Much.
- India Consumer Discretionary: Growth Slowing on NBFC Liquidity Tightness, Demand Softness
1. Bharti Airtel – Performance Is Inflecting at Last. Vodafone IDEA, Not so Much.
Bharti Airtel’s (BHARTI IN) recnt 3Q19 results hold out a glimmer of hope for the sector. After a precipitous decline in margins and returns since Jio entered the Indian telecom market in 2016, things have started to stabilize at last for Bharti. The same cannot be said for Vodafone Idea (IDEA IN) where extremely high leverage is limiting options. Chris Hoare does not expect a real turnaround in 2019 as Jio looks to create a 2+2 market (two operators (JIo and Bharti) and two weak/failing operators (IDEA and BSNL). While the pressure on Bharti is intense they have substantial other businesses (esp Africa) which ease the pressure somewhat. It may be difficult to put money to work in Indian telecoms at the moment given the pressure, but at some stage we believe a recovery does start and the stock to own will be Bharti. A turning point is close.
2. India Consumer Discretionary: Growth Slowing on NBFC Liquidity Tightness, Demand Softness
- While many NBFCs pulled back on disbursements in 3QFY19, the sharpest declines were in SME/MSME, LAP and Loan Against Shares (LAS) segments
- The pullback in SME/MSME financing has reduced working capital financing in some supply chains. This has impacted stocking in some discretionary items.
- A number of players alluded to weakness in discretionary consumption post Diwali owing to the NBFC liquidity squeeze
- With supply chains selectively impacted by liquidity tightness and weakness in demand, consumer discretionary players could not pass on input cost increases during the quarter
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