Credit growth to telecom industry set to surpass previous levels in FY23: Bank of Baroda

Growth of credit to the telecom industry in FY23 is set to surpass levels seen in FY22, with credit growth as of July end at 13.1% compared with 13.4% for the full year in the previous fiscal, analysts at Bank of Baroda said in a report.  

The bank said that credit to the sector has been on an upward trajectory since FY18 but due to the pandemic, fell 21.9% in FY21.  

“After declining by 0.6% in FY18, the sector made a strong comeback, registering a growth of 34.5% in FY19 and continued with this upward momentum, with double digit growth in even FY20. However, given the pandemic induced slowdown, credit to telecom sector dropped by 21.9% in FY21. The following year (FY22), base effect enabled a favourable growth and is expected to climb higher in FY23,” Jahnavi Prabhakar , economist, Bank of Baroda, said in a note. 

The telecom industry over the years has raised funds through different modes including bonds. In FY20, it raised a total of ₹2,414 crore which in FY21 rose to ₹28,861 crore, but moderated to ₹9,150 crore in FY22. As of July this year, the industry had raised about ₹545 crore. 

The bank added that external commercial borrowing, or ECB, approvals in the telecom sector grew to $1.3 billion in FY22 from $0.8 billion in FY21, largely used as working capital and refinancing of loans. As of July, there have not been not any ECB applications from the telecom sector.  

Carriers including Reliance Jio, Bharti Airtel and Vodafone Idea have seen their net sales gain momentum slowly over the last few financial years beginning FY18, while net profit declined sharply in FY20, but has been on the rise since. “The pace of contraction has been much slower.” 

As per data, net sales rose to ₹2,045 billion in FY22 up from ₹1,423 billion in FY18, while losses narrowed from ₹263 billion to ₹145 billion during the period.