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Sequential performance showed marginal improvement; Slowing 4G addition a matter of concern.

Our view and valuation

Overall, improved operating performance in the quarter led by increase in ARPU due to tariff hike in Nov'21. The growth in ARPU by 7.8% QoQ is a encouraging sign. It continues to lose subscribers but there has been definite sign of moderation in the loss of subscribers. The slowdown in addition of 4G subscribers is a matter of concern.  It needs capital infusion for augmenting the capital expenditure to match up with peers in terms of 4G coverage/capacity. We expect that 2G to 4G migration would continue to drive growth in ARPU and EBITDA of the company.  The net debt of Rs 1.96 trn remains high at Net debt/EBITDA(FY22) of12x. We estimate revenue CAGR of 16.0% over FY22‐FY24E, with average EBITDA margin of 46.4%

We maintain REDUCE Rating on the stock with revised target price of Rs 9/share. The stock trades at EV/EBITDA of 9.3x on FY24E EBITDA

Result Highlights

*Reported revenue of Rs 102.4bn, up 5.4% QoQ, led by 7.8% QoQ increase in ARPU to Rs 124.; While the number of subscribers was down 3.4mn QoQ to 243.8mn.

*EBITDA margin increased by 610 bps QoQ to 45.4%, led by control on network operating expenses.

*Net loss reduced to Rs 65.6bn compared to net loss of Rs 72.3bn in Q3FY22.

*The number of 4G subscribers increased by 1.1mn QoQ to 118.1mn.  

*Average data used by 4G user increased to 13.9GB/ Month compared to 13.7GB/ per month in Q3FY22.

*Net debt decreased by Rs 10.6bn QoQ to Rs 1964.2bn, but still at 12x Net debt/ FY22 EBITDA.

*Capex increased sequentially to Rs 12.1bn in the quarter compared to Rs 10.5bn in Q3FY22.

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