Airtel’s ₹14,000 crore NBFC bet small vs ₹60,000 crore FCF; dividend upside likely: IIFL Capital

Bharti Airtel’s proposed entry into lending through a new NBFC may be grabbing headlines, but in the context of its surging free cash flows, the allocation remains modest, says Balaji Subramanian, Senior Vice President – Institutional Equities at IIFL Capital Services.

Speaking to ET Now, Subramanian noted that Airtel has generated nearly ₹45,000 crore in free cash flow in the first nine months of FY26 — after accounting for capex and spectrum payments. On an annualised basis, consensus estimates peg free cash flow (FCF) at around ₹60,000 crore for FY26–FY27.

₹14,000 crore NBFC investment: Manageable allocation

Airtel plans to capitalise its proposed NBFC with ₹20,000 crore over the next few years, with 70% (around ₹14,000 crore) coming from Airtel and the remaining from Bharti Enterprises.


In perspective:

• ₹14,000 crore is less than 25% of one year’s projected FCF.
• FCF is expected to rise further as revenues and EBITDA expand and capex stabilises.
• The company has largely completed its heavy 4G and 5G network investments.

“This is a small enough allocation in the broader scheme of things,” Subramanian said, adding that the move represents expansion into an adjacency where Airtel can monetise its 350+ million subscriber data insights.

The big opportunity — and the big risk

Through Airtel Payments Bank and Airtel Finance, Airtel has already built experience in financial services partnerships.

However, owning a majority stake in an NBFC introduces direct balance sheet credit risk — something entirely new for the telecom major.

That uncertainty likely explains the stock’s recent weakness, as investors weigh execution risks in a business far removed from telecom operations.

Could it rival Bajaj Finance or Shriram?

If the ₹20,000 crore capital base is leveraged five times, Airtel could theoretically build a loan book of around ₹1 lakh crore over five to six years — a meaningful size in India’s NBFC landscape.

But Subramanian cautioned that it is too early to compare the venture with established lenders like Bajaj Finance or Shriram Finance.

“Running an NBFC at scale is very different from telecom. Execution will be key,” he said.

Deleveraging nearly complete

Airtel’s balance sheet has strengthened significantly:

• External net debt (excluding spectrum and AGR liabilities) is likely to fall below ₹10,000 crore.
• The recently called rights issue is expected to bring in around ₹16,000 crore.
• Deleveraging is largely done, freeing up room for growth investments and shareholder returns.

Massive capex still ahead

While telecom capex intensity is moderating, Airtel still has meaningful investment plans:

• Data centre expansion to 1 GW capacity (potential 25% market share).
• Estimated ₹50,000–60,000 crore capex over 3–4 years for data centres.
• Home broadband expansion targeting 10–15 million households.
• Ongoing fibre and backhaul investments to narrow gaps with competitors.

Despite annual capex of roughly ₹35,000 crore, FCF generation is expected to remain strong.

Dividend upside in focus

With deleveraging largely complete and FCF robust, Subramanian expects higher dividend payouts going forward — in line with global telecom trends. “Even after factoring in NBFC investments and data centre expansion, free cash flows should remain meaningful,” he said.

India’s telecom sector is still benefiting from tariff repair, which should support near-term revenue growth.

Airtel’s NBFC foray represents a calculated diversification move backed by strong cash flows. While credit risk is a new variable for investors to monitor, the company’s improving balance sheet and rising FCF could pave the way for higher dividends — even as it invests aggressively in adjacencies like financial services and data centres.

For now, the story is one of capital allocation discipline versus execution risk — and markets will be watching closely.