IIFL views on IVRCL Infrastructure, Bharti Airtel, Reliance Communications

IIFL on Bharti Airtel - Target of Rs 710
IIFL has upgraded its rating on Bharti Airtel to buy with a target price of Rs 710 in its research report.

"The amended IUC regulations (effective 1 April 2009) will come as a relief for Bharti, despite a MTC (mobile termination charge) cut from Rs 0.3 to Rs 0.2 (in line with our expectations). It could have been worse: the rival lobby had been pushing for an MTC cut to zero, which would have significantly dented Bharti Airtel’s earnings. Besides, a cut to zero would have enabled Reliance Communications, RCOM and other start-up networks to price outgoing cross-network plans far more effectively, and possibly resulted in a congestion in Bharti’s network. On the other hand, the cut does represent a setback to Bharti’s rural expansion economics."
"Mobile-to-fixed termination charge has also been cut from Rs 0.3 to Rs 0.2, and this is favourable to wireless operators. Incoming TC on ILD has been raised only to Rs 0.4 from Rs 0.3, well below our expectation. We estimate that all these TC cuts -after factoring in licence fees, spectrum charges and service tax-will take 3.2% off Bharti’s EPS in FY10ii and FY11ii. We see the termination amendments as the termination of a lengthy period of uncertainty for Bharti. For the present, we see no significant regulatory threats, despite imminent change at the helm in TRAI. RCOM’s gains from this mild move will be limited, whereas Idea Cellular should be relatively unaffected. We upgrade Bharti to BUY with a target price of Rs 710," says IIFL's research report.


IIFL on Reliance Communications - Target of Rs 220

IIFL has recommended a buy rating on Reliance Communications with a target price of Rs 220 in its research report.

"RCOM has upgraded its CDMA network to 3G and launched wireless broadband under the name Reliance Netconnect Broadband Plus. The product will be available in 35 top cities from 17 March in the form of data cards and modems. The company has already placed a Rs 3 billion order with Huawei and ZTE for 1m such USB modems, with 100,000 modems expected to be delivered this week. We believe that this is a significant positive for RCOM and enables it first-mover advantage (with 3G auctions postponed, no operator would be able to match its offerings) and also take better advantage of mobile number portability (MNP), expected later this year. BUY with a target price of Rs 220," says IIFL's research report.


IIFL on IVRCL Infrastructure - Target of Rs 166

IIFL has recommended a buy rating on IVRCL Infrastructure with a target price of Rs 166 in its research report.

"Purandar Lift irrigation scheme project costing Rs 2.5 billion was awarded to IVRCL in 2001 by the Maharashtra government. Construction work continued for about a year before it was stopped owing to funding constraints. CIDCO’s sewage treatment plant at Navi Mumbai, this Rs 180 million project was awarded to Hindustan Dorr-Oliver (HDO) by CIDCO. Based on sequential batch reactor process, the plant has a capacity of 25MLD. The plant has commenced purification with the operations being currently handled by HDO."

"CIDCO Seawoods Estate residential project, construction of 0.39m sq ft space under phase II of the project is in progress. Phase II costs Rs 851 milliom and is on schedule for completion in December 2009. Construction of 0.68m sq ft under phase I is complete. BUY, target price of Rs 166," says IIFL's research report.