ECONOMIC ANALYSIS

Here are some of the key points that have been suggested by the India Economy Survey 2009.

Economy can grow around 7 percent in 2009/10. This off course, is largely dependent on how the US Economy recovers over next few months. If US economy bottoms out around December, as many analysts are expecting, India can easily look at 7% upwards growth.

The Economy will get back to its growth path of around 9% in medium term. The government has shown its eagerness for Fiscal consolidation. The Fiscal deficit

target is suggested to be set at 3 percent of GDP at the earliest. Inflation is suggested to be a non-issue moving forward. The Economic Survey suggested allowing the public to hold greater equity in

public sector banks and aligning of voting rights in banks with equity holdings. Calibrated monetary policy approach is suggested for early return to high growth

path. The Economic Survey has suggested that quality Foreign Direct Investment should

be allowed to seek regulatory reforms in higher education. High growth rate in this sector - with weight of less than 3% in GDP - was a key driver which pushed GDP figures for the quarter ended September 2008 to 7.6%. The telecom sector's potential in India remains under-tapped and growth rate in tele-density, especially in rural India, will remain robust. The rural circle, where penetration is 12.72%, will drive the growth in the coming years.

According to the estimates of the World Bank employment in the telecommunication sector has grown by 33% since 1994, the highest growth among all the sectors in the service industry.

Fiscal Policy Initiatives

100 per cent foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing.

FDI ceiling in telecom services has been raised to 74 per cent.

Industry Overview

Indian telecom is more than 165 years old, beginning with the commissioning of the firsttelegraph line between Kolkata and Diamond Harbour in 1839. In 1948, India had 0.1 million telephone connections with a telephone density of about 0.02 telephones per hundred population. As of June 2007, there were 225.21 million telephone (including cellular mobile) connections in the country with a telephone density of 19.86 telephones per hundred population. Out of total 225.21 million telephone connections, 185.13 million (nearly 82 percent) connections pertained to wireless and mobile phones.Telecommunications is one of the prime support services needed for rapid growth and

modernization of various sectors of the economy. It has become especially important in recent years because of enormous growth of Information Technology (IT) and its significant impact on the rest of the economy. India is perceived to have a special comparative advantage in IT and in IT-enabled services. However, sustaining this advantage depends critically on high quality telecommunication infrastructure. It is equally important to speed up structural changes in this sector in line with trends in other countries to ensure that telecommunication services are not only made available on the scale needed to sustain rapid growth in the economy as a whole but also that their cost are in tune with the expectations of a modernizing economy. Telecom sector is considered to be one of the most vibrant sector with the highest growth rate which has nearly more than 60 lakh customers added every month. Today the Indian telecommunications network with over 270 million connections is the third largest in the world and the second largest among the emerging economies of Asia. Over the last few years the sector has witnessed high growth rates. The current addition of about eight million lines per month plus the telecommunications sector is on a strong footing to achieve the target of 500 million connections by 2010.

The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.

Introduction of a unified access licensing regime for telecom services on a pan-India basis.

Introduction of mobile number portability in a phased manner, starting in the fourth quarter of 2008.

The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000 community service centres in rural India to provide broadband connectivity in 2008-09.

The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations

Major Players :

BSNL - Incumbent service provider and World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India

Services include Wire line, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc.

Subscribers : BSNL---------------------------- 42673357 ---------------------15.95%

MTNL - State owned operator covering the cities of Mumbai an Delhi.Provides both fixed and mobile services.

Bharti Airtel - Integrated operator with presence in all segments.

Leads the mobile segment in the country. Subscribers : Bharti Airtel -------------------88382758--------------------- 33.04%

Reliance Communications - Largest player in India in the CDMA segment

Launched a GSM network. Subscribers : Reliance Telecom --------------10353841--------------------- 3.87%

Tata Teleservices - Integrated operator (with VSNL) with presence in all segments

Provides CDMA services in 20 circles. Subscribers : Tata ---------------- 63340024 ----------------------23.68%

Company Analisys :• Bharti Airtel Limited (Bharti Airtel) is an integrated telecommunication service providing company.

• The company principally provides cellular and basic telecommunication service through three business units namely, Mobile Services, Telemedia Services and Enterprise Services – Carriers and Corporate.

Mobile Services segments offers mobile and fixed wireless services using GSM technology on 900MHz and 1800MHzbands.

This segment contributed around 71% of the total consolidated revenue for the fiscal year 2008

Telemedia Services segment offers broadband and basic telephone services in addition to the recent foray into the IPTV and DTH business. About 34.8% of its customer base was subscribed to broadband services.

Enterprise Service segment of the company Enterprise Service segment of the company provides integrated voice and data communications to corporate.

The revenue from the Enterprise Service segment to carrier and to corporate accounted for around 15% and 4%, respectively for the fiscal year 2008.

• The company generates major portion of its revenue within India contributing around 94% of the total revenue while the remaining portion which is 6% has been contributed by its overseas segment for the fiscal year 2008.

Highlights:1. Unveils ‘The Airtel Advantage’ Offers 50 paisa per minute on both STD

and local calls2. Forms Strategic Business Alliance with Cisco to help Drive Growth for

Indian Enterprises3. Unveils New Global Wholesale Service Portfolio for Telcos across the

World4. Plans USD 5 bn capex for 2009-105. Made its television debut by launching Airtel Digital TV, Its Direct-to-Home (DTH)

satellite TV service.

6. Expanded its international footprint by launching mobile operations in Sri Lanka

on a state of the art 3.5G network.

7. Year on Year growth of total customer base by 50% resulted in 38% increase in

revenues and 23% increase in net profit.

SWOT Analysis

Strengths • Strong balance sheet driven by cash on hand and by lower debt • Strong growth profile as demonstrated by 37% growth in last financial year • High ROCE of approx 30% in a capital intensive business • Protection from rural exposure and strong corporate governance

Weaknesses • Near-term weakness in Bharti’s share price as investors increase focus on RCOM’s subscriber growth • Slow growth because of competitive market and regulatory pressure

Opportunities • New services such as Airtel Digital TV, IP TV • New launch in Sri Lankan operations on Jan 12, 2009 • Participation in the license bidding in Iran, an attempt to succeed in other emerging geographies across the world • Appointment of new senior management from FMCG background

Threats • Increasing competitors like Idea cellular, Reliance Comm

• Declining Average revenue per user (ARPU) driven by lower IUC, lower mix of urban consumers in subscriber additions and intensifying competition • Slow down in telemedia, wireless and enterprise segments • Slowdown in fixed line space

Financial summary

Balance Sheet of Bharti Airtel

------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 1,853.37 1,893.88 1,895.93 1,897.91 1,898.24

Reserves 2,675.38 5,437.42 9,515.21 18,283.82 25,627.38

Revaluation Reserves 2.13 2.13 2.13 2.13 2.13

Networth 4,533.60 7,345.56 11,443.27 20,241.49 27,643.97

Secured Loans 3,959.88 2,863.37 266.45 52.42 51.73

Unsecured Loans 1,034.41 1,932.92 5,044.36 6,517.92 7,661.92

Total Debt 4,994.29 4,796.29 5,310.81 6,570.34 7,713.65

Total Liabilities 9,527.89 12,141.85 16,754.08 26,811.83 35,357.62

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Net Block 9,764.99 13,006.88 19,305.63 19,030.65 25,013.36

Capital Work in Progress 994.46 2,341.25 2,375.82 2,751.08 2,566.67

Investments 931.90 719.70 705.82 10,952.85 11,777.76

Inventories 31.58 17.74 47.81 56.86 62.15

Sundry Debtors 715.74 1,076.17 1,418.52 2,776.46 2,550.05

Cash and Bank Balance 174.96 201.81 239.11 200.86 153.44

Total Current Assets 922.28 1,295.72 1,705.44 3,034.18 2,765.64

Loans and Advances 1,354.85 1,937.54 3,160.02 5,103.13 5,602.83

Fixed Deposits 209.17 105.61 541.35 302.08 2,098.16

Total CA, Loans & Advances 2,486.30 3,338.87 5,406.81 8,439.39 10,466.63

Total CL & Provisions 4,708.12 7,272.80 11,042.67 14,362.33 14,466.89

Net Current Assets -2,221.82 -3,933.93 -5,635.86 -5,922.94 -4,000.26

Miscellaneous Expenses 58.35 7.94 2.66 0.20 0.09

Total Assets 9,527.88 12,141.84 16,754.07 26,811.84 35,357.62

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Net Sales 8,142.44 11,259.12 17,851.61 25,761.11 34,048.32

Other Income (1,707.95) 26.94 105.62 104.04 -1,261.75

Stock Adjustments 11.57 -13.84 30.07 9.05 5.29

Total Income 6,446.06 11,272.22 17,987.30 25,874.20 32,791.86

Expenditure

Raw Materials 83.67 53.56 52.16 42.90 17.70

Employee Cost 475.86 734.20 1,076.95 1,297.88 1,397.54

Other Manufacturing Expenses 2,365.51 3,299.73 5,017.27 7,339.01 8,627.13

Selling and Admin Expenses 1,951.25 2,804.85 4,030.48 5,892.50 9,385.68

Miscellaneous Expenses 280.05 314.37 444.28 535.46 1,409.89

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00

Total Expenses 5,156.34 7,206.71 10,621.14 15,107.75 20,837.94

Operating Profit 2,997.67 4,038.57 7,260.54 10,662.41 13,215.67

PBDIT 1,289.72 4,065.51 7,366.16 10,766.45 11,953.92

Interest 317.00 236.81 282.07 393.43 434.16

PBDT 972.72 3,828.70 7,084.09 10,373.02 11,519.76

Depreciation 1,019.36 1,432.34 2,353.30 3,166.58 3,206.28

Other Written Off 161.34 127.39 137.80 266.07 178.82

Profit Before Tax -207.98 2,268.97 4,592.99 6,940.37 8,134.66

Extra-ordinary items 22.23 17.64 9.92 -60.67 -46.15

Tax 353.60 273.68 566.79 632.43 321.78

Reported Net Profit 1,210.67 2,012.08 4,033.23 6,244.19 7,743.84

Ratios

Ratio MARCH 2008 MARCH 2009

Gross Profit Margin (%) 29.08 29.33

Net Profit Margin(%) 23.99 22.58

Debt Equity Ratio 0.33 0.28

Current Ratio 0.57 0.69

Operating Profit Margin(%) 41.37 38.74

Gross profit margin has marginally increased from the previous year level

however net profit margin has reduced modestly. It is primarily due to higher

depreciation (3,206.28 vs 3,166.58), higher interest payout ( 434.16 vs 393.43)

Operating profit margin have reduced primarily due to a an increase in total

expenses (20,837.94 vs 15,107.75). In the previous year total expenses constituted 58% of the total

sales and however total expenses for 2009 constituted 61% of the total sales.

Total income has risen from 25,874.20 Cr in March 2008 to 32,791.86 Cr in

March 2009,an increase of 26.73%. This is basically on account of an increase in

sales turnover which has increased from 25,761.11Cr in March 2008 to

34,048.32 Cr in March 2009 which is an increase of 32.16%. Whereas the total

expenses have increased from 15,107.75 Cr in March 2008 to 20,837.94 Cr in

March 2009 which is an increase of 37.9%. This is basically on account of

increase in selling and administrative expenses which has increased from

5892.50 Cr in March 2008 to 9,385.68 Cr in March 2009.

The reported net profit for Bharti Airtel Limited has increased from Rs. 6244.19 Cr in

March 2008 to Rs. 7,743.84 Cr in March 2009 which is an increase of 24.01%.

Reserves have increased Rs 18,283.82 Cr in March 2008 to 25,627.38 Cr in March

2009 which is an increase of 40.16%.

Fixed assets has increased Rs.19,030.65 Cr in March 2008 to Rs. 25,013.36 Cr in

March 2009 which is an increase of 31.33%

Revenues from mobile services represented 84% of the total revenues and non-

voice revenue contributed to approximately 14.1% of the total revenues

The cash profit from operations for the year ended March 31, 2009 was Rs 140,065

million as compared to Rs 111,374 million for the year ended March 31, 2008, a growth

of 26% year on year. The net finance cost for the year was Rs 11,613 million.

CAPITAL STRUCTURE

YEAR 2008 2009

DEBT 6,570.34 Cr 7,713.65

EQUITY Share Capital 1,897.91 Cr 1,898.24

Shareholders equity 20,241.49 27,643.97

Preference EQUITY 0 0

Debt – Equity Ratio 2008 2009

0.33 0.28

Total debt has increased from Rs. 6,570.34 Cr in March 2008 to Rs. 7,713.65 Cr

in March 2009 which is an increase of 17.4%. Unsecured loan has risen by 1144

Cr. (short term loan borrowing from a bank – repayable within 1 year).

During the year, the company issued 238,942 equity shares on exercise of stock

options under ESOP Scheme 2005 of the Company. The company also allotted

93,408 equity shares upon conversion of Foreign Currency Convertible Bonds

(FCCBs). Due to these corporate actions, the issued, subscribed and paid-up

equity share capital increased from 1,897,907,446 ( March 31, 2008) to

1,898,239,769 equity shares as of March 31, 2009.

A decline in debt to equity ratio represents an increase in total shareholder equity

(27,643.97 vs 20,241.4). Also debts have risen from previous year level (7,713.65 vs 6,570.34).

A high debt/equity ratio generally means that a company has been aggressive in financing its

growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could

potentially generate more earnings than it would have without this outside financing. 

Bharti Airtel has been conservative as far as its capital structure is concerned. Firm’s debt to

equity ratio of .28 reflects a stable financial position of the company

DIVIDEND POLICY

YEAR MARCH

2005

MARCH

2006

MARCH

2007

MARCH

2008

MARCH

2009

EPS (Rs.) 6.53 10.62 21.27 32.90 40.79

The general assumption concerning dividend is with the increase in EPS a

shareholder excepts a surge in share price and a higher dividend payout. As

higher EPS is ann indicator of companies financial growth.

For the first time the company declared a dividend of Rs. 379.65 Cr in March

2009. It is significant to note that Bharti Airtel operates in a highly capital

intensive industry so the company used to retain its earnings in the previous

years for investment purposes.

2006 2007 2008 2009

DIVIDEND

PAYOUT

0 0 0 Rs. 379.65 Cr

We get to see the management is quite conservative in dividend payout. It

follows a strategy of high retained earnings

2006 2007 2008 2009

Reserves( RS.

In Cr.)

5,437.42 9,515.21 18,283.82 25,627.38

Given the nature of the industry, Airtel’s mega expansion plans (international

acquisitions), Bharti Airtel believes in low dividend policy.

Develop

Assumption

The new company belongs to a reputed group and enjoys a strong brand equity

Promoter has strong financial position

Debt Equity

XYZ Limted 3000Cr 1000Cr

Debt will be raised from 2 sources

o Personal Financing – 1500 Cr

o FCCB – 1500 Cr @ 9% per annum ( Secured )

Equtiy

QIP – 1000 Cr @ Rs. 40 per share (30% of the Total Equity )

Since XYZ Limited is a new firm in the telecom industry which is a capital intensive

industry the initial requirement for funds is quite high. So to start with the company

should raise Rs. 4000 Cr out of which Debt will be 3000 Cr and equity will be 1000 Cr.

Initially it will not be easy for the company to raise debt as the telecom industry is

characterized by stiff competition and falling tariff and call rates. Therefore I recommend

Personal financing to the account of Rs. 1500 Cr and FCCB (Foreign Currency

Convertible Bond) to the account of Rs. 1500 Cr.

At present offering a new issue of shares is not recommended as the condition of the

stock market is not favorable and the company will not be able to get a good price for

their shares as it is a new entrant. Therefore I recommend that the company goes in for

a Qualified institutional placement (QIP)

Once the company establishes itself in the industry it can raise money from the public.

WORKING CAPITAL MANAGEMENT

Working capital, also known as net working capital or NWC, is a financial metric which

represents operating liquidity available to a business. Along with fixed assets such as plant and

equipment, working capital is considered a part of operating capital. It is calculated as current

assets minus current liabilities. If current assets are less than current liabilities, an entity has

a working capital deficiency, also called a working capital deficit.

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its assets cannot

readily be converted into cash. Positive working capital is required to ensure that a firm is able to

continue its operations and that it has sufficient funds to satisfy both maturing short-term debt

and upcoming operational expenses. The management of working capital involves managing

inventories, accounts receivable and payable and cash.

Decisions relating to working capital and short term financing are referred to as working capital

management. These involve managing the relationship between a firm's short-term assets and

its short-term liabilities. The goal of working capital management is to ensure that the firm is

able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-

term debt and upcoming operational expenses.

Decision criteria

By definition, working capital management entails short term decisions - generally, relating to

the next one year period- which are "reversible". These decisions are therefore not taken on the

same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based

on cash flows and / or profitability.

One measure of cash flow is provided by the cash conversion cycle - the net number of days

from the outlay of cash for raw material to receiving payment from the customer. As a

management tool, this metric makes explicit the inter-relatedness of decisions relating to

inventories, accounts receivable and payable, and cash. Because this number effectively

corresponds to the time that the firm's cash is tied up in operations and unavailable for other

activities, management generally aims at a low net count.

In this context, the most useful measure of profitability is Return on capital (ROC). The

result is shown as a percentage, determined by dividing relevant income for the 12 months by

capital employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm

value is enhanced when, and if, the return on capital, which results from working capital

management, exceeds the cost of capital, which results from capital investment decisions as

above. ROC measures are therefore useful as a management tool, in that they link short-term

policy with long-term decision making.

Management of working capital

Guided by the above criteria, management will use a combination of policies and techniques for

the management of working capital. These policies aim at managing the current

assets(generally cash and cash equivalents, inventories and debtors) and the short term financing,

such that cash flows and returns are acceptable.

Cash management : Identify the cash balance which allows for the business to meet day to

day expenses, but reduces cash holding costs.

Inventory management: Identify the level of inventory which allows for uninterrupted

production but reduces the investment in raw materials - and minimizes reordering costs -

and hence increases cash flow.

Debtors management: Identify the appropriate credit policy, i.e. credit terms which will

attract customers, such that any impact on cash flows and the cash conversion cycle will be

offset by increased revenue and hence Return on Capital (or vice versa).

Short term financing: Identify the appropriate source of financing, given the cash

conversion cycle: the inventory is ideally financed by credit granted by the supplier;

however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to

cash" through "factoring".

Take calculated risks, beyond fundamentals

Analysis of stocks using fundamental analysis is passe, quantitative investment strategy based on

mathematical calculations is the in thing. Investors are familiar with stock selection strategies

based on fundamental. Most mutual fund and insurance companies use fundamental analysis to

select stocks for their portfolios. Fundamental analysis is done by examining factors such as

balance sheet, earning ratios, business environment and then decision is made whether to buy a

particular stock or not.

With the advancements in the markets and new sophisticated investors entering the market, new

strategy is coming into play for stock selection. This is known as quantitative strategy. In this

strategy stocks are analyzed by using mathematical models.

In this strategy there is very less human intervention, unless there are exceptional scenarios such

as fraud, natural calamity or some such extraordinary event. Quantitative analysis is undertaken

using computer based models, which are designed by respective manager. The advantage is that

computers aren't swayed by emotion, and they obviously react much faster than a person ever

could. The problem is that humans have to program those computers, and even computers can

make mistakes when they are programmed incorrectly.

Markowitz formalized a notion of mean return and covariances for common stocks which

allowed him to quantify the concept of "diversification" in a market. He showed how to compute

the mean return and variance for a given portfolio and argued that investors should hold only

those portfolios whose variance is minimal among all portfolios with a given mean return.

Investors looking for portfolio diversification should invest in quant funds. These investors are

those who believe in qualitative aspects of investment process and don not focus solely on

returns. This discipline is already being parctised in developed countries but in India this is yet to

emerge owing to many limitations such as shallow markets, lack of modern derivative

instruments and regulatory aspects. Mutual fund providers for example Sharekhan offers quant

based investing under a product called nifty thrifty.

The main advantage of investments done on the basis of fundamental analysis is understanding

the reasons behind stock picking or initiation of a trade. In quantitative analysis one is not able to

understand the reasons behind for the stock movements.

Moreover quantitative investors are exposed to certain risks associated with leverages and under

such circumstances risk management techniques become important and emerge as a deciding

factor between success and failure. Failure of Celebrated hedge fund long term capital

management that used to employ quantitative strategies underline such issues with this

investment style.

Outlook on Bharti Airtel

Talks with MTN have failed.

After negotiation of more than four months and two deadline extensions, theproposed $23-billion cash-and-share-swap deal between Bharti Airtel and SouthAfrica’s MTN has been called off. The Bharti Airtel management has indicated thatthe reason for the deal not going through was the inability of the South Africangovernment to “accept the deal in the current form”.The deal, had it happened, would have given Bharti Airtel access to the fast-growingAfrican market. With the Indian market saturating, as visible in declining ARPU andMOU, the pace of growth has slowed down for Bharti Airtel. Given a mature urbanmarket, future growth for Bharti Airtel is expected to come from higher penetrationinto rural areas. In such a scenario, a merger with MTN would have enabled BhartiAirtel to address these concerns.

Competitive pressures building up

Pricing pressures are mounting with new players such as Tata DoCoMo and Airceloffering per second billing tariff plans.RCoM also has launched a 50 paise tariff plan for its users across the board. BhartiAirtel has also launched similar plans. However the company’s plans differ from thatof RCom because they are applicable only for on-network calls.The Telecom Regulatory Authority of India (TRAI) is also planning to make the onesecond

pulse a mandatory tariff option for all operators to bring in transparency intothe tariff plans. Although this is beneficial for the subscribers, such a ruling may hurtARPUs of incumbent operators. Moreover, an increase in MOU cannot offset theARPU decline and would therefore impact margins of telecom operators.Mobile number portability coming into force from Jan 1 would aggravate competitiveintensity. With aggressive price war and declining MOU elasticity, we believe theARPU and margins will come under pressure in the near term.HOWEVER………………………..We believe that Bharti Airtel’s cash outlook is strong and the balance sheet reflectsstrength. The management has indicated that it would continue to scout forinorganic growth opportunities. Furthermore, with strong subscriber adds eachmonth, the company has maintained its leadership position in this competitiveenvironment.Bharti Airtel Ltd – Result Update ACMIIL 6Bharti Airtel is well positioned with a strong balance sheet for the 3G auctions. Webelieve that the company will be in a position to profit from the first-moveradvantage. The increase in data revenue from 3G will to some extent be offset thesaturation in voice market.However, we expect price wars to get aggressive with incumbents also launchingcompetitive tariff plans. These price wars, along with declining MOU elasticity, havethe potential to impact topline of the operators. Further, the impact of tariffs cuts isuncertain and will be visible only in 3QFY10. Many new players are expected tolaunch services in the near term; with mobile number portability being implementedas the same time, this increases uncertainty in the sector. Therefore, we arecautious on the telecom sector and we expect near-term volatility in stock prices.However we believe Bharti Airtel is fundamentally strong and is well positioned tosustain in this competitive environment. We maintain our positive outlook on thestock from a long-term perspective. Even after a 7–15% fall in ARPU, Bharti tradesat a forward PE of 11X its FY 11 EPS, which is not expensive in our view. Wechange our recommendation from “BUY” to “BUY at DECLINES” for a target priceof INR321.