The promoter group’s stake in Bharti Airtel will come down to around 62% from the current 67% after the completion of the Rs 25,000-crore rights issue which the telecom firm has announced. This is because the promoter group has renounced its right for shares worth Rs 5,000 crore (around 5%) in favour of the Singapore government’s investing arm GIC which will be investing this amount.
The promoter group comprising, Bharti Group, Bharti Telecom and Singapore Telecommunications (Singtel) will subscribe to Rs 11,785.7 crore. Of this, Singtel will invest Rs 3,750 crore, the company said in a separate statement, representing its rights entitlement for its direct stake of 15%. Bharti Telecom will renounce its right for shares worth Rs 5,000 crore in favour of GIC, Singtel added. This renunciation is from the stake held by Singtel. As a result, post the issue, Singtel’s effective stake in Bharti Airtel will come down to be 35.2%, from the current 39%, but it will still remain the single-largest shareholder in Bharti Airtel.
Bharti Airtel said in a statement that its promoter and promoter group also reserved the right to subscribe either itself or through investors for additional shares in the issue, including in the event of under subscription by the public, in line with the current laws.
Bharti Telecom holds a 51% stake in Bharti Airtel. Within Bharti Telecom, 51% is held by the Bharti family and 49% by Singtel. The effective interest of Bharti family in Bharti Airtel is around 27% while that of Singtel is 39%. This 39% will come down to 35% after the completion of the rights issue.
The company’s rights issue price has been set at Rs 220 per fully-paid equity share.
Meanwhile, GIC’s investment in Bharti will mark its third largest investment in an Indian company after it struck deals with mortgage lender HDFC and real estate developer DLF.
GIC last year invested around $800 million in HDFC and pumped in $1.4 billion in the rental arm of DLF a year before that.
Apart from the rights issue, Bharti Airtel also plans to raise Rs 7,000 crore via an offshore bond offering.
Earlier this week, global ratings agency Moody’s had said that Bharti’s proposed rights issue, if completed, is credit positive for the company as it will allow it to reduce debt and improve its liquidity. It said that if the entire proceeds of the issue are used to pay down the debt at the Indian operations immediately, consolidated adjusted debt/Ebitda would
fall down to 3.8 times from 4.5 times at the fiscal year ending March 31, 2019.
The fundraising plan by Bharti Airtel comes at a time when telecom companies continue to bleed with below-cost tariffs even as capex needs are increasing to build a 4G network coverage to effectively compete with Jio.
Bharti Airtel just about managed to stay in the black with a small profit of Rs 86 crore, on the back of an exceptional gain of Rs 1,017 crore in three months of October-December 2018.
On February 5, ratings firm Moody’s had downgraded senior unsecured rating for Bharti as well as the backed senior unsecured notes issued by Bharti’s wholly owned subsidiary, Bharti Airtel Int’l (Netherlands). The ratings firm had assigned a Ba1 corporate family rating (CFR) to Bharti and withdrawn the company’s Baa3 issuer rating, while keeping the ratings outlook negative.
Moody’s has estimated the profitability of Bharti’s Indian mobile segment will remain low over the next several quarters in the absence of a fundamental change in the pricing of mobile services, together with proportional shift in the composition Bharti’s subscriber base to high-end 4G customers.
Bharti’s consolidated total debt in FY18 stood at Rs 1.11 lakh crore versus Rs 1.07 lakh crore in FY17. The company’s standalone debt was at Rs 65,416 crore at the end of March 31, 2018, against Rs 60,095 a year ago.
In the last almost two years, Bharti has been reducing its stake in its listed tower company, Bharti Infratel to reduce debt and take on competition. The company has raised
over Rs 12,000 crore through these stake dilutions. Last December, Bharti decided to further sell a 32% stake in Infratel, valued at close to Rs 15,500 crore to build its capex spends for 4G expansions.
In November 2018, Bharti’s Africa arm raised $1.25 billion through a placement of shares to six global investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group International, amidst its plans to list its African arm by June 2019. Recently, the company also raised $200 million from Qatar Investment Authority (QIA).