Bharti Hexacom Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

5 Soumen Ray, Gopal Vittal, Shashwat Sharma, Kartik, Naval

Analysts

6 Aditya Bansal, Manish Adukia, Piyush Chaudhary, Rishabh Dhancholia, Sanjesh Jain, Sumangal Nevatia, Vivekanand Subbaraman, Pranav Kshatriya

Financials & KPIs

Geographic & Segment Commentary

• Rajasthan Circle: Highly competitive market with intense customer acquisition dynamics. Competitive intensity mirrors national levels, but the terrain necessitates unique solutions, particularly for network deployment and homes connectivity.
• Northeast Circle: Company holds a very comfortable competitive position. Terrain is difficult and large, requiring a mix of wireless and wired solutions. Cities like Shillong represent developed, aspirational demographics with strong growth potential.
• Homes, Office & Other Business: Added 75,000 net customers during the quarter, with revenue growing ~8% sequentially. Strategy is focused on building a high-quality customer base, pivoting towards fiber where economics are compelling, and using FWA with sharper precision in areas where fiber is not accessible.

Company-Specific & Strategic Commentary

• Homes Strategy Pivot: Management made a conscious decision to tighten acquisition quality in the homes business, particularly for Fixed Wireless Access (FWA), due to higher churn, weaker customer continuity, and rising global memory/chipset pricing. The strategy is now centered on accelerating fiber rollout and deploying FWA only where unit economics and customer quality are compelling. Impact of the correction is already unwinding, with momentum expected to return.
• Capital Allocation & CapEx: CapEx is directed towards 5G densification, network modernization, and growing the homes and SME business. The balance sheet remains robust, with net debt to EBITDA at 0.2x. If the business requires further investment to maintain competitive and profitable growth, management indicated a willingness to spend adequately; the outlook from the parent (Bharti Airtel) indicates continued focus on high-growth areas like data centers (Nxtra), which represent a different entity and requirement.
• Technology & Efficiency: The parent group is leveraging AI and digital platforms across its operations, including a patented technology for real-time image processing using small language models on endpoint devices for field engineers, reducing cloud compute costs to zero. This is expected to be extended into stores and other operational areas.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Homes Business Strategy and FWA Pullback

• Question: Regarding the slowdown in home subscriber additions and pressure on margins, is this a conscious slowdown due to cost inflation or increased competition? Also, how does the pivot to fiber vs FWA play out? (Sumangal Nevatia, Kotak Securities)
• Answer: The reduction in additions is a direct result of tightening acquisition quality. The company previously used very aggressive, low-entry pricing for FWA, leading to round-tripping and poor customer quality. The strategy is now to double down on fiber, which offers better longevity, lower churn, and superior economics, and to use FWA only where fiber is not accessible. Momentum is already returning as this correction unwinds. (Gopal Vittal, Shashwat Sharma)

Competitive Landscape and Capital Allocation for Hexacom

• Question: How many of the 400 key Indian cities are in Hexacom's circles, and what is the absolute home opportunity? Also, are there areas for reinvestment given the parent's focus on data centers? (Vivekanand Subbaraman, AMBIT Capital)
• Answer: Approximately 15-17 of the 400 cities are in these two circles. The demographics and terrain of Rajasthan and the Northeast make a mixed wireless/wired strategy ideal. On capital, the data center business is a separate entity and does not apply to the telco organization. The company will spend adequately to drive competitive, profitable growth, and remains comfortable with its low leverage. (Soumen Ray)

Energy Costs and Diesel

• Question: Why were energy costs lower YoY despite higher diesel prices? Is there a timing difference? (Aditya Bansal, Motilal Oswal)
• Answer: The benefit is primarily from seasonal solar power generation and some one-offs. The full impact of higher diesel prices has not yet been felt due to fuel stockpiles in DG sets. Underlying sequential trends are more or less flat. (Soumen Ray, Kartik)

Depreciation and Homes Segment Profitability

• Question: What caused the sharp QoQ increase in depreciation, and when will the homes segment translate revenue into profit? (Sanjesh Jain, ICICI Securities)
• Answer: Higher depreciation is due to the extra day in the quarter and the ongoing IPTV rollout. On homes profitability, the business is in a CPE-based investment phase and will turn positive once it reaches critical mass. The unit economics are sound, and the underlying profitability is not different from other players, despite paying fiber rental to the parent. (Soumen Ray)

Key Takeaway

Bharti Hexacom delivered a strong Q1 FY27 with revenue of ₹2,510 crore (+4% QoQ) and EBITDA margin at 48.2%, supported by robust cash generation of ₹830 crore and a net debt-to-EBITDA ratio of just 0.2x. The quarter was marked by a deliberate strategic pivot in the homes business, where management tightened FWA acquisition quality due to poor customer cohorts and rising chipset prices, resulting in a temporary slowdown in net adds (75,000). This correction is expected to unwind, with growth reverting to previous rates as the company refocuses on fiber deployment. The mobile business continues to perform, adding 210,000 customers with ARPU at ₹259. Management remains confident in the underlying opportunity across its two circles (Rajasthan and Northeast), citing a robust balance sheet and willingness to invest in 5G densification and network modernization to drive competitive and profitable growth going forward. Key watch points include competitive intensity in Rajasthan and the full impact of diesel price inflation.