Bharti Airtel took a big battering on the stock market on Wednesday after it reported a 16 per cent drop in consolidated profit after tax in the third quarter (October-December). But the profit drop was a much sharper 31 per cent if the whole of calendar 2011 is considered.

The disappointing bottom line led to the biggest single-day drop in the company’s share price since May 12, 2010. It also was the worst performer among S&P CNX Nifty stocks on the day. The stock closed at Rs 354 on the National Stock Exchange, losing 6.56 per cent from the overnight close of Rs 378.75.

The company’s consolidated total income at Rs 18,508 crore in the third quarter was, however, 17 per cent more than a year ago. But PAT fell by 16 per cent to Rs 1,022 crore and net profit after minority interest declined by 22 per cent to Rs 1,011 crore.

Sequentially, from the July-September quarter to October-December, total income rose by 7 per cent, PAT stayed unchanged but net profit after minority interest fell by 1.5 per cent.

“Bharti's results surprised us with the sequential margin (operating profit margin) decline.

We note that this is a largely fixed- cost business which is exhibiting a strong price improvement and continuous revenue growth. In this environment of declining competition, margins should have exhibited a more positive trend. However, the company has disappointed on margins for the third consecutive quarter,” said Bhuvnesh Singh of Barclays Capital in a research note.

The earnings per share of Bharti Airtel stood at Rs 2.67 in the third quarter, much lower than the 3.48 per cent median estimate of Bloomberg analysts.

On Wednesday the stock opened at Rs 370 at a discount of 2.3 per cent over the previous day’s close. Sentiments were bearish and the stock declined further to hit an intra-day low of Rs 352 on the Bombay Stock Exchange, at which level it was 7.17 per cent below the previous close. The stock fell for the third consecutive day on BSE. Over the four quarters in calendar 2011, the company’s financials reflected higher levels of weakness, with PAT down at Rs 4,581 crore, a steep 31 per cent drop from Rs 6,668 crore in

Calendar 2010. This was despite total income increasing by 28 per cent to Rs 69,071 crore and operating profit rising by 23 per cent to Rs 22,957 crore.

But depreciation costs rose sharply by 44 per cent in calendar 2011, and interest costs by 1.35 times to Rs 3,444 crore – the two main factors for the PAT drop. Total income growth was hit by a disappointing year-on-year growth of 11 per cent in combined revenues from India and South Asia in April-December to Rs 29,800 crore. The African operations saw a robust 57 per cent year- on- year growth but revenues there were only Rs 307 crore.

rajeshgajra@mydigitalfc.com