Don't buy Bharti at Rs 314: Paras Adenwala
Paras Adenwala says he would not buy Bharti at Rs 314.
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| ET Now caught up with Paras Adenwala, MD and Principal Portfolio Manager, Capital Portfolio Advisors, to get his views on the plunging Bharti shares.
The belief is that Bharti is overpaying for Zain assets, 10 times EBITDA. How would the stock do?
We need to have a full picture of what Zain has been doing before concluding that the amount that they have paid is very high. But prima facie, it is a good acquisition for Bharti, considering that in terms of penetration in urban India, we are almost full. Rural India is growing very rapidly, and therefore, to continue to grow in the manner that they have been growing, getting into Africa which just has 50 per cent penetration is fantastic. So, from a strategy point of view, it is a very good move of Bharti. They also bought into Bangladesh. So, rather than getting into developed markets, they are getting into underdeveloped markets, which is the right strategy for them. So prima facie, I am quite positive.
Would you buy this stock at Rs 314?
Let me evaluate the price that they bear. While strategically it makes a lot of sense, it is also important that they bear right price for it.
But most market experts believe that they are overpaying for these assets at $10.5 billion given that consolidate revenues would be about $2 billion for the companies put together and that gives them a main stay in Africa because there are not too many assets out there which are up for sale. So Bharti takes what it gets and pays a premium for that. Does not that justify from a long-term strategy point of view and give you take on the stock?
No. If they can improve the growth rates of Zain business in Africa from what they are, then the payback period would be shortened and to that extent, the seemingly acquisition may not as expensive.
What would you do with the stock at Rs 314?
I would still wait.
The belief is that Bharti is overpaying for Zain assets, 10 times EBITDA. How would the stock do?
We need to have a full picture of what Zain has been doing before concluding that the amount that they have paid is very high. But prima facie, it is a good acquisition for Bharti, considering that in terms of penetration in urban India, we are almost full. Rural India is growing very rapidly, and therefore, to continue to grow in the manner that they have been growing, getting into Africa which just has 50 per cent penetration is fantastic. So, from a strategy point of view, it is a very good move of Bharti. They also bought into Bangladesh. So, rather than getting into developed markets, they are getting into underdeveloped markets, which is the right strategy for them. So prima facie, I am quite positive.
Would you buy this stock at Rs 314?
Let me evaluate the price that they bear. While strategically it makes a lot of sense, it is also important that they bear right price for it.
But most market experts believe that they are overpaying for these assets at $10.5 billion given that consolidate revenues would be about $2 billion for the companies put together and that gives them a main stay in Africa because there are not too many assets out there which are up for sale. So Bharti takes what it gets and pays a premium for that. Does not that justify from a long-term strategy point of view and give you take on the stock?
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No. If they can improve the growth rates of Zain business in Africa from what they are, then the payback period would be shortened and to that extent, the seemingly acquisition may not as expensive.
What would you do with the stock at Rs 314?
I would still wait.
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