RIL, Airtel, Vodafone, Indus Tower: Ambit ups EPS forecast; check ratings & price targets

Ambit has revised its outlook for India's telecom sector, increasing its FY25-42 revenue CAGR estimate by 1% as decisive government support for Vodafone Idea (VI) continues. The government's intention to halt further equity conversion and offer a partial AGR waiver reinforces the sector's three-player structure, which Ambit describes as having "solidifies the industry's '3-Player National Champion' structure, enabling continuous tariff hikes."

Ambit has consequently raised its target prices for Bharti Airtel Ltd by 13% and Reliance Industries Ltd (RIL) by 8%. With capex for 5G and FTTH peaking, the focus is shifting to monetisation, and a 15% tariff hike expected in the fourth quarter of FY26 is set to be a primary trigger for sector growth. Airtel remains the preferred large cap over RIL due to its superior free cash flow conversion, while Indus Towers is identified as the absolute top pick for its "unique 'Utility + Growth' profile, benefiting from VI's survival-driven network expansion."

Indus Towers traded at 7x FY27E cash EBITDA, nearly a 50% discount to global peers. Ambit recommends a near-equalweight portfolio stance for RIL, as its revised target price implies a 4% downside.

Key sector players remain Bharti Airtel, Reliance Jio (JPL), Vodafone Idea Ltd and Indus Towers Ltd. Ambit expects more share sales by strategic investors in JPL, Airtel, and Hexacom between 2026 and 2028, with government divestment from VI only likely after 2028, upon completion of its network expansion. Ambit sees these stake sales as opportunities for institutional investors to increase sector allocations as index representation rises.

Ambit has a 'buy' rating on Bharti Airtel (Target Price: Rs 2,528), Vodafone Idea (Target Price: Rs 15.1), Indus Towers (Target Price: Rs 559) and Bharti Hexacom Ltd (Target Price: Rs 2,170). It has a 'sell' rating for Reliance Industries with a target price of Rs 1,510.

Indian telcos are well positioned compared to global peers, benefiting from regulatory support and consumer demand. With minimal risks from spectrum purchases and technology disruption during FY26-30, telcos are expected to maintain capital discipline. Premium valuations are supported by robust balance sheets and earnings momentum.

Ambit forecasts a moderation in FY25-28 ARPU CAGR to 12%, down from 13%, but expects a longer period of tariff repair through FY42. FTTH and FWA capex monetisation by Bharti and Jio is anticipated to result in 13-15% revenue CAGR for India between FY25 and FY35, supported by a 15% data usage CAGR. Ambit does not foresee changes to current pricing structures or telcos taking steps to curb data usage.

With the sector experiencing regulatory backing and healthy consumer uptake, Ambit projects Airtel and Jio will achieve 15% and 17% revenue CAGR, respectively, through FY42. Operating leverage is expected to enable telcos to maintain conservative balance sheets, pay dividends, and attract institutional investment flows.

Ambit also identifies new opportunities in fixed wireless access, FTTH, and cloud services, which, while individually small, collectively represent meaningful growth and are expected to improve return on capital employed. Airtel and JPL's share of non-mobile revenues is projected to rise to 25-30% by FY30 from the current 20-25%. RIL is seen as pursuing a riskier but potentially larger artificial intelligence opportunity compared to Airtel.

The outlook for Indus Towers remains positive, with dividend payouts expected to resume from March 2026 and growth driven by high-margin, tenancy-led expansion. Ambit reiterates that VI and Indus remain closely tied to government measures aimed at preserving the sector's three-private-player structure, ensuring ongoing stability and investor interest.