Why foreign investors are in telecommunications shares

Copyright © HT Digital Streams Limit all rights reserved. Dipti Sharma 5 min read 17 Jun 2025, 03:13 IST NSDL data showed that FPIs invested $ 1.879 million in telecommunications shares in May. (Beeld: Pixabay) Summary market participants believe that the sector is undergoing an important structural shift, which puts telecommunications shares on the investor radar. The telecommunications package is back in the spotlight and draws strong interest from foreign investors, with signs that domestic mutual funds can also seize. NSDL data shows that approximately $ 2.32 billion thrown in by foreign portfolio investors in May has entered about $ 1.88 billion in telecommunications shares, providing the largest monthly FPI inflow in India’s telecommunications sector. It is also a sharp leap of $ 523 million in April, indicating the increasing investor confidence in space. One of the main reasons for this influx of capital in the telecommunications sector may be that Singtel sells its 1.2% stake in Bharti Airtel in a Cursed agreement in mid-May, on a private placement base, to international and Indian institutional investors. Also read: FPIs return to India, but will they stay? An important event depends on the heavy structural recovery of the market, the sector believes undergoing a major structural shift, which places telecommunications shares on the investor radar. Average revenue per user (ARPU) has improved significantly post-Kovid, says Krishna Appala, senior research analyst at Capitalalmind Research. Arpu fell below £ 120 by 2018 amid intense price wars. Now Bharti Airtel’s ARPU is at £ 245 and Reliance JIOs at £ 203, with long -term targets closer to £ 300. The market has consolidated, and although vodafone idea retained about 18% share, the share still has a constant print of the other two stronger players, he said. The sector is experiencing a growing subscriber base and an increase in data usage, with 5g monetization opening an incremental revenue stream for players, experts said. There is a broad consensus among market participants that the wireless industry is on a growth path, powered by a consolidation in the telecommunications space and a steady stream of tariff increases over the past few years. “As the average price of mobile data in India remains one of the lowest in the world, we see further scope of the tariff increase and it gives confidence about the prospects of the telecommunications sector,” says Piyush Pandey, research analyst at Center Broking. In addition to the wireless segment, Pandey added that the fixed broadband and B2B segments are also a strong momentum in revenue growth. For now, Pandey Bharti Airtel and Indus Towers find attractive in terms of business prospects. Center has a ‘Buy’ rating on Bharti Airtel and Indus cords and a ‘reduced’ recommendation on Tata communication and vodafone ideal. However, Krishna Appala, senior research analyst at Capitalmind Research, has fallen sharply. He pointed out that telecommunications operators have spent a lot of launching a lot of 5G in the past two years -nearly £ 80,000 cumulative in FY24. “But in FY25, we expect Capex to fall by 15-20%. The Capeex-to-income ratio, which has a highlight of 30-45%, is now dropping to about 18-25%. This suggests that companies will eventually be returns on their heavy Capex investments,” Appala said. While Airtel has the lining ARPU in the industry with a strong focus on execution, Indus Towers is a potential beneficiary of increase in Capeex by Vodafone Idea Ltd. Meanwhile, Tata communication is focused on the B2B telecommunications segment, he pointed out. Also read: If homemade capital grows foreign funds: Can India finance its own growth? Mutual funds are being warmed up recent trends also indicate that the telecommunications services and equipment space can see the purchase of interest of domestic mutual funds as soon as they start deploying capital, experts said. In May, mutual funds bought £ 5,768.7 telecommunications shares, with Bharti Airtel, Indus Towers, Vodafone Idea, Tata Communications, and Railel Corp. are the best choices, showed the financial data of the JM. In April, mutual funds sold telecommunications services worth £ 2,852.2 crore. The report pointed out that Telecom accounts for 4% of the BSE 200 index, but that mutual funds are still the mark, by 1.1% less than the benchmark. JM Financial has a ‘buy’ rating on Bharti Airtel’s stock and a ‘hold’ recommendation on Vodafone ideal. Also read: Trai, telecommunications companies Spar on the demand of the data, even though the benchmark Nifty 50 dropped by 1.2% over the past month, several shares with telecommunications performed better. Bharti Hexacom increased by 7%, Railel rose by 11%, GTL infrastructure rose 26%, sterlite technologies rose 10%, Avanel rose 32%and foundhya telelinks rose 8%. However, pure telecommunications plays were subdued: Bharti Airtel rose 2.4%, Reliance Industries fell 1.3%, and vodafone idea dropped 10%. But for long -term investors, the story can just start. “Given the critical role of the sector in the formation of India’s digital future, telecommunications stocks remain essential for a growth-oriented portfolio,” says Vipul Bhowar, senior director, head of shares, at Waterfield Advisors. India’s national telecommunications policy 2025 aims to double the export of telecom products and attract £ 1.5 trillion ($ 18 billion) in telecommunications infrastructure investments annually. In addition, the Telecommunications Act 2023 was laid for complete launch through 2025 — to simplify the licensing, reducing the onset of the onset of the onset. Bhowar also took note of the government’s plan to integrate Earth and Satellite Networks, which would open the door to foreign players such as Jio-six, Airtel’s ewesat unive and Starlink, would reform the telecommunications landscape. Not without challenges, however, there are obstacles. Only a handful of businesses in the telecommunications space can take up large amounts of capital, according to Vivekanand Subbaraman, chief analyst at Ambit Capital. He pointed out that most of the telecommunications fundraiser came from the Reliance group in 2020. Since then, Reliance has not done much, while the Bharti group has actively raised capital, not only to finance the growth of business, but also through secondary transactions where early investors regain their capital. “In the end, the actual investment opportunities are still concentrated in some big players where capital is still recycled,” he notes. Subbaraman sees potential beyond the core telecommunications players in the supplemental space, including tower companies and manufacturers of telecommunications equipment. However, he warned that most of these shares were traded thinly, and that it would be less suitable for institutional investors looking for significant, non-specific capital with predictable returns. “The kind of money simply won’t flow in some of these names,” he said. Some market participants also warn that some of these lesser-known telecommunications stocks can only be in the short term, which is traded at valuations that have been extended. For example, Optiemus Infracom, with a market cap of more than £ 5,000 crore, is currently trading at a tremendous price ratio of 199.5 times to earnings compared to its average PE ratio of 74.97 years. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. 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