1) BHARTI AIRTEL LIMITED
- Net Profit grew 158% YoY led by exceptional gains
- Bharti Airtel’s Q1 FY25 net profit swelled 158 percent year-on-year to Rs 4,160 crore from Rs 1,612 crore in the corresponding quarter last year. This was mainly helped by exceptional items. During the quarter ended June 30, 2024, the net exceptional gain of Rs 735 crore comprised a gain of Rs 1,399.1 crore on account of a favourable judgement by the Supreme Court of India regarding the waiver of interest on the tax treatment of adjusted revenue-linked variable license fee payable to DoT.
- The net exceptional gain also includes a gain of Rs 274 crore pertaining to the divestment of Airtel Lanka, offset by a charge on account of a foreign exchange loss of Rs 938.7 crore due to currency devaluation in its group subsidiaries. Airtel said that the net tax benefit on the above exceptional item is Rs 328 crore.
- The telecom major’s revenue for the April-June quarter rose 2.8 percent YoY to Rs 38,506 crore from Rs 37,440 crore, which the company said was limited due to currency devaluation in Africa.
- Huge Potential in the cloud services segment
- The company will focus on growing cloud business and other enterprise services like Communications Platform as a Service (CPaaS). The cloud service has a huge growth potential where the public cloud market is about USD 4.9 billion and growing at 35% and the private cloud market is about USD 3.6 billion growing at 16%.
- Multi-year agreement with CBDT
- Bharti Airtel and Central Board of Direct Taxes (CBDT) have finalised a multi-year agreement where Airtel will serve as the network and connectivity partner for the income tax department.
- Balance Sheet strength continues to be solid and improving
- In Q1 25, the company fully paid the advance payment of sprectrum dues of 2012 and 2015 auction. India net debt to EBITDA stood at 2.75 compared to 3.19 a year ago.
- Capex to be lower this year as compared to FY 23-24
- Capex for the quarter stood at Rs. 6,780 cr. and the capex this fiscal is going to be moderate. The capex in the previous year stood at around Rs. 30,000 cr.
- ARPU of INR 211 as compared to 209 in Q4 24
- ARPU was driven by continued focus on feature phones to smartphone upgrades, prepaid to postpaid upgrades and data monetisation. Recent tariff hikes will further improve the ARPU. The company believes that ARPU of INR 300 is necessary for sustainable investments.
- Company to invest around INR 5,000 crores in the data centres over the 3-year period
- The demand for data centres continues to be strong and therefore the company will continue its investment in data centres. Though it is a fragmented industry with multiple competitors, Nxtra, the subsidiary of Bharti Airtel, is the largest player.
2) ONGC LIMITED
- Profit decline in Q1FY25 amidst rising crude prices and increased operational costs
- ONGC reported a net profit of ₹8,938 crore for Q1 FY25, representing a 15.1% decrease from ₹10,527 crore in the same quarter of the previous year.
- This decline is attributed to lower sales revenue driven by decreased national gas realizations, increased exploration write-offs, and higher depletion expenses. Notably, sales revenue increased, bolstered by higher revenue from crude oil and value-added products, with crude oil billing net of VAT and CSE recorded at ₹83.05 per barrel, up from ₹76.36 per barrel in Q1 FY24. The exchange rate stood at ₹83.42 compared to ₹82.21 in the previous year, while statutory levies surged by ₹2,121 crore, primarily due to higher crude oil prices and the imposition of Special Additional Excise Duty (SAED).
- Production Strategy Amid Rising Exploration Costs and Mature Field Declines
- The operational metrics for the quarter reflected ONGC’s ongoing efforts to optimize production. Crude oil production benefitted from higher billing prices and proactive measures to counter declines from mature fields. Gas production is currently at 2.4 million SCMD from the East Coast, with substantial contributions from various fields. However, exploration costs increased to ₹1,640 crore, driven by higher write-offs and survey expenditures, while depletion costs rose by ₹900 crore due to elevated expenses in the Western Offshore region.
- Strategic Initiatives Drive Growth with Promising Discoveries
- ONGC continues to focus on key strategic initiatives to drive growth. In the KG Basin (KG-DWN-98/2), production is currently at 12,000 barrels of oil per day and 1.5 million SCMD of gas, with expectations to ramp up to 45,000 barrels per day as more wells become operational. Additionally, the company reported promising discoveries in the GS-6 and GS-8 fields, along with a new prospect in the C-series showing encouraging flow rates. These efforts underscore ONGC’s commitment to enhancing production from new projects to offset declines from mature fields.
- Profit Declines Amid Subsidiary Challenges and Cost Efficiency Gains
- Consolidated net profit for ONGC was reported at ₹10,236 crore, reflecting a substantial decrease of 42.79%, largely influenced by the performance of subsidiaries HBCL and MRPL. In particular, ONGC Videsh Limited (OVL) experienced a reduction in costs due to a change in royalty payment methods in Colombia, indicating a shift towards more efficient operational practices.
- Investment SummaryÂ
- ONGC’s strategic focus on boosting production from new projects effectively addresses declines from mature fields, as highlighted in its Q1 FY25 results. The company’s commitment to enhancing crude oil and gas production in the KG Basin and developing promising discoveries positions it well for future growth. Despite a decline in net profit, ONGC showcases resilience through targeted investments in exploration and production. Ongoing developments in the KG Basin and other initiatives are expected to significantly enhance production and financial performance in the coming quarters. Given these positive indicators, we maintain a favorable outlook on ONGC as a compelling investment opportunity, while urging investors to remain cautious of crude oil price fluctuations and potential regulatory impacts.