Key Points
I would just be a little bit cautious on the fact that net debt continues to rise from a YoY perspective despite capex declining quite sharply on a QoQ level by more than 25 odd percent...
So, the monetisation of the new energy businesses, where it has been mentioned that the first of these facilities will be commissioned by the end of this year, plus any tariff improvements that happens in the digital services business because of enterprise and fibre to home gaining traction and at certain point of time when they start monetising the 5G investments that they have done, those two will be big triggers to look forward to..
The issue is going to be when does that inflection point come when the returns from all of this capex starts to outpace the capital that they are spending and the expectation would be that if the decline in capex in this quarter continues to gain traction and happens in a more material way going forward, then we will probably see that inflection actually happening...
But at this point of time, obviously, it means that return ratios, the ROEs and ROCs of this business have continued to remain at sub-10% levels, because while earnings growth is extremely strong, it is also being accompanied by an equal increase in the run rate of capital allocation across segments...
Saturday as a working day has obviously come as a surprise, so hopefully we will have an update but we remain sort of neutralish to an add on the story as of now because we do believe that the fair price at Rs 2,600 -2,700 does factor in the kind of traction in earnings growth but then the risk reward becomes balanced because of the factors that I said that the FCA and the return ratios remain limited for the next two to three years, given the capex and the kind of capital allocation that the company continues to do in several businesses...
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