Bharti Airtel Target Cut to ₹2,250 by Jefferies on Twin Risks

Introduction

Global brokerage firm Jefferies has revised its outlook on Bharti Airtel, reducing the stock's price target to ₹2,250 from ₹2,575. The adjustment is driven by two primary concerns: a potential delay in the initial public offering (IPO) of competitor Reliance Jio, which could postpone necessary tariff hikes across the industry, and questions surrounding capital allocation following Airtel's significant investment into the non-banking financial company (NBFC) sector. Despite these near-term challenges, the brokerage maintained its 'Buy' rating, highlighting what it considers a highly favourable risk-reward profile for the telecom major.

Jefferies' Revised Outlook

The decision to lower the price target is rooted in a more cautious forecast for Bharti Airtel's future earnings. Jefferies has trimmed its India revenue and EBITDA estimates for the company by 6-8% for the fiscal years 2026 to 2028. This revision directly reflects the perceived risks that could temper the operator's growth. The stock has already shown signs of pressure, underperforming the Nifty50 index by approximately five percentage points in 2026, with a year-to-date decline of 14%. To account for these risks, Jefferies also lowered its target EV/EBITDA multiple for Airtel's India operations to 12x from a previous 13x.

The Jio IPO Factor and Tariff Hike Delays

A significant factor influencing the revised forecast is the timing of the Jio IPO. Jefferies now anticipates a delay beyond the first half of the 2026 calendar year. The report points to a regulatory overhang, noting that a final gazette notification to reduce the minimum stake-sale requirement for large IPOs has not yet been issued, despite being approved by SEBI six months ago. This delay could have a cascading effect on the telecom sector's ability to raise prices. Consequently, Jefferies has adjusted its tariff hike expectations, now modeling only a single 15% sectoral increase in December 2026. This change directly lowers Bharti's projected average revenue per user (ARPU) and EBITDA.

Airtel's ₹20,000 Crore NBFC Foray

The second major concern flagged by the brokerage is Bharti Airtel's surprise entry into the financial services business. The company announced plans to infuse capital into a new lending venture, with the broader Bharti group committing ₹20,000 crore to Airtel Money Limited. This strategic pivot has raised questions among investors regarding the company's capital allocation strategy, moving funds away from its core telecom operations. Jefferies noted that the bulk of the stock's recent price decline occurred after this announcement, suggesting market apprehension about the move into a competitive and capital-intensive sector.

A Strategic Pivot to Financial Services

Airtel's move marks a significant shift from being a loan distributor to a direct lender. The company received its NBFC license from the Reserve Bank of India on February 13, 2026. The planned ₹20,000 crore capitalisation will be structured with Airtel contributing 70% (₹14,000 crore) and the promoter group, Bharti Enterprises Limited, providing the remaining 30%. The company aims to leverage its vast customer base of over 600 million and its data analytics capabilities to capture a share of India's underserved credit market, where the formal credit-to-GDP ratio is just 53%.

Market Reaction and Stock Performance

Investor reaction to these developments has been cautious. Bharti Airtel's shares fell over 3.5% shortly after the NBFC expansion plan was announced. The stock's 14% year-to-date decline reflects the market's concerns about both the delayed tariff hikes and the new financial services venture. The correction wiped out a significant portion of market capitalisation, indicating that investors are weighing the potential rewards of diversification against the risks of entering a new, highly regulated industry.

Brokerage Perspectives on Bharti Airtel

While Jefferies has adopted a more cautious short-term stance, other brokerages maintain a broadly positive outlook, suggesting that recent market concerns may be overstated. The consensus among analysts points towards strong underlying fundamentals for the telecom operator.

Motilal Oswal Financial Services, for instance, believes the market's reaction to the NBFC announcement is exaggerated. The firm argues that the promoters have a strong track record of judicious capital allocation and projects that Bharti could generate over ₹1.3 trillion in free cash flow between FY26 and FY28.

Management Addresses Investor Concerns

In response to the market's anxieties, Bharti Airtel's management hosted an investor call to clarify its strategy. The company assured stakeholders that the ₹20,000 crore investment in Airtel Money would be phased, with only 10-15% invested in the first year. Management also committed to a progressive dividend policy as free cash flow generation accelerates, signaling a continued focus on shareholder returns while pursuing new growth avenues.

The Long-Term Growth Narrative

Despite the target price reduction, Jefferies' report underscores that Bharti Airtel's long-term growth story remains compelling. The brokerage continues to forecast a strong 13-14% compound annual growth rate (CAGR) in India revenues and EBITDA. Based on a valuation range of 9.5x to 13.5x EV/EBITDA, Jefferies calculates a fair value band of ₹1,570 to ₹2,890 per share. This range implies a potential upside of 59% against a downside of 13%, making the risk-reward profile 'extremely favourable' in their view.

Conclusion

Jefferies' adjustment to Bharti Airtel's price target highlights specific near-term risks related to the timeline for industry-wide tariff hikes and the company's diversification into financial services. While these factors have created uncertainty and weighed on the stock, the underlying consensus among analysts points to a robust long-term growth outlook. Investor focus will now shift to the execution of the NBFC strategy and clarity on the timing of the next tariff increase, which remains a key catalyst for the sector.