Bharti Tele-ventures: Right number

Bharti reported an impressive 16 per cent sequential jump in EBITDA last quarter, despite sales growing by just 7.6 per cent.

While the long distance services division reported a huge 28.7 per cent jump in EBITDA, it was the mobile services division that accounted for the majority of the increase in overall EBITDA.

Mobile revenues grew 8.9 per cent sequentially on the back of 11.8 per cent growth in net subscribers. Revenue growth was lower on account of a 2.9 per cent drop in average revenues per user (ARPU) compared with the December quarter.

Yet, EBITDA margins rose by 220 basis points thanks to an improvement in the operations in new circles. Losses in new circles fell to 6.1 per cent of revenues from these circles, compared to 66.6 per cent in the previous quarter.

What's more, even the existing circles reported a 130 basis points improvement in margins, thanks to the cut in ADC (which wasn't passed on to customers entirely) and an 90 basis points increase in high-margin, non-voice revenues to 9.4 per cent.

Bharti ended FY05 with a revenue growth of 60.6 per cent and an 80 per cent jump in EBITDA. Mobile revenues grew 66.7 per cent last fiscal, on the back of a 68.9 per cent increase in subscriber base.

Interestingly, the company spent Rs 2983 crore on capex for its mobile business last fiscal, which amounts to about $150 for every subscriber added last fiscal. Needless to say, some of the capex was to augment services for existing customers, but still the $150 figure is rather high.

Especially so, since the new subscribers being acquired have considerably lower average revenue per user. In absolute terms, Bharti expects capex to be $900 million to $1 billion, pretty much the same levels as FY05. As far as valuations go, Bharti now trades at an FY06 EV/EBITDA of about 10 times, still double the valuation of peers in the Asian region.

Sun Pharma

Sun Pharmaceuticals has reported a 7 per cent growth in its consolidated profit before tax to Rs 117.4 crore in the last quarter. Profit growth has been aided by net interest income growing to 21.9 crore compared to nil in the earlier year.

The company has about $ 440 million ( approximately Rs 1900 crore) in cash and senior management has indicated that they could utilise the funds for financing suitable acquisitions.

As a result, investor sentiment has been quite bouyant "" this stock has gained about 6.7 per cent in the past couple of months as compared to a 4.3 per cent decline in the Sensex.

As anticipated, VAT has resulted in lower offtake from dealers in the last quarter "" there was a 7.2 per cent fall in domestic sales. A key highlight has been the 58 per cent growth in exports to Rs 153.7 crore.

As a result, total sales expanded 16.5 per cent . Company officials explained that they have been expanding their focus on the US market "" the company's US subsidiary Caraco has seen its sales grow 28 per cent in the last quarter.

Also the commencement of operations at their Bangladesh facilities provided them momentum. However, the company has encountered pricing pressures in the American market.

The company has faced a rising cost base in the last quarter "" R & D costs have risen 29 per cent, and raw material costs have jumped 65 per cent, the new MRP-based excise regime being the culprit.

While operating profit ( excluding other income and net interest income) has remained more or less unchanged at Rs 103.6 crore in the last quarter, operating profit margin has shrunk 767 basis points to 32.33 per cent.

Going forward, in a bid to better manage pricing pressures in the US, the company is looking at boosting formulation sales.

With contributions from Amriteshwar Mathur and Mobis Philipose