Bharti’s Rights Issue Credit Positive But Neutral For 31 Percent Shareholder Singtel: Report

Bharti Airtel Ltd's board approval to raising fresh capital through a rights issue of up to Rs 21,000 crore is credit positive. (Steve Jurvetson/Flickr (CC BY 2.0))

SINGAPORE — Moody’s Investors Service said Bharti Airtel Ltd’s board approval to raising fresh capital through a rights issue of up to INR 21,000 crore ($2.85 billion) is credit positive.

Bharti said, on Aug. 30, that it will raise the equity with a quarter of the proceeds received upfront and the remaining in two tranches over the next three years.


Moody’s said fresh capital would keep leverage relatively stable amid growing investments in 5G, ongoing cash payments for spectrum, and a settlement payment related to the adjusted gross revenue (AGR) dispute with the government.

“We expect proceeds from the transaction will be used for debt repayment and capital spending, including network upgrades, 5G investments, and growth initiatives such as more aggressive subscriber growth to wrest market share from India’s struggling third-largest operator Vodafone Idea,” Moody’s said.

Bharti’s adjusted debt/EBITDA was 3.7 times for the 12 months ended on June 30.

Moody’s said the capital raising also provides Bharti with more financial capacity to leverage its network in the Indian mobile space, as competition eases and tailwinds from higher data usage and increases in average revenue per user (ARPU) benefit EBITDA and margins.

The transaction is credit neutral for Bharti’s 31.7 percent shareholder Singapore Telecommunications Ltd. Singtel can subscribe to its portion of the rights without significantly increasing leverage.

Singtel’s 31.7 percent ownership includes a direct stake of 14 percent and indirect ownership through Bharti Telecom Ltd (BTL).

As per the terms of the rights issuance, Singtel will be required to pay 25 percent of the total proceeds on application and the balance in two additional calls as decided by Bharti’s board of directors, based on the company’s requirements within a maximum period of 36 months.

Bharti’s promoter group, comprising the Mittal family, Singtel, and BTL, has agreed to collectively subscribe to its portion of the rights issuance and also subscribe to any unsubscribed shares in the issue.

“We expect this would be a combination of Singtel subscribing to its direct stake of 14 percent, and BTL subscribing to 35.8 percent of the rights through cash and new borrowings at that level,” Moody’s said.

Singtel would need to pay only about 100 million dollars as upfront payment for subscribing to rights from its direct stake in Bharti. The remaining 300 million dollars is callable over the next 36 months.

In the event that Singtel has to make further debt-funded payments for BTL’s portion of the rights, its leverage will weaken. Moody’s said that has a low likelihood.

(With inputs from ANI)

Edited by Saptak Datta and Praveen Pramod Tewari



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