Will Bharti Airtel be only Nifty company to post loss in Q1 FY19? Motilal Oswal points out harsh possibility

As the first-quarter FY19 earnings season begins, with heavyweight companies Infosys, RIL, HDFC Bank all set to release their report cards in the coming weeks, Motilal Oswal Securities’ has said that Bharti Airtel will be the only Nifty firm which is expected to post a loss in Q1 FY19. The domestic research and brokerage firm Motilal Oswal Securities has said that the “overall picture is looking brighter” despite a deterioration in macros with the escalating volatility amid the global trade environment.

In its latest ‘India Strategy’ report, Motilal Oswal Securities has pointed out that India’s largest telecom company Bharti Airtel is “the only Nifty company expected to post a loss in 1Q FY19”. Further, Motilal Oswal Securities has said that the telecom universe will report a loss in Q1 FY19 with chances of Aditya Birla Group’s telecom firm Idea Cellular’s loss remaining elevated. If this happens then this will be telecom’s fourth consecutive quarter of losses.

Bharti Airtel’s India wireless revenue should remain flat on quarterly basis yet India wireless EBITDA is expected to witness 13% QoQ decline dragging down consolidated EBITDA by 4% QoQ, Motilal Oswal Securities said in the report. “Spillover of the fresh round of undercutting by operators from 4Q FY18 to 1Q FY19 continued to take a toll on telcos’ revenue,” it said.

“Further, consolidation in the telecom sector had fuelled the exit of tenancies, leading to higher tenancy cost per operator. This, coupled with installation of cell sites on fresh towers (non-loading) and soaring diesel prices, is expected to increase the QoQ network cost for all operators,” Motilal Oswal Securities report added.

However, on a collective basis, quarterly sales of Nifty companies are estimated to grow at 22.7% YoY while PAT (Profit After Tax) will grow at 25.7% YoY (highest since June 2014), Motilal Oswal Securities said. “The confidence on earnings recovery is higher today than any time in the recent past,” the report noted.

Going forward in FY19, it will be a case of “improving micros and challenging macros,” Motilal Oswal Securities said. Amid the challenging macros, Motilal has hinted towards crude oil price inflation, currency, rising bond yields. With the higher growth in MSPs (Minimum Support Prices), and the peaking of headline and core inflation at 5.4% and 6.4%, respectively, in June 2018, Motilal Oswal Securities is expecting a hike in policy rates by 25 basis points by the Reserve Bank of India on 1 August 2018.