Bharti Airtel’s promoter company Bharti Telecom Limited on Tuesday sold a 2.75% stake in the telecom operator to raise over Rs 8433 crores or $1.15 billion from institutional investors. The sale proceeds will now be utilized to fully repay the debt at Bharti Telecom.
The latest development follows a large fundraising exercise by Reliance Industries’ Jio Platform, which is the parent of Reliance Jio, India’s largest telecom operator by subscribers.
Airtel’s stake sale took place through an accelerated book-building process in the secondary market. It was anchored by several existing and new shareholders, several marquee global mutual fund complexes, sovereign wealth funds, multi-strategy funds and domestic institutional investors in sizable quantities, as per an official statement.
“On the back of such a strong demand from international and domestic investors, the amount raised was increased to $1.15 billion. With the proceeds, Bharti Telecom Limited will become a zero debt company providing an even stronger financial flexibility and capacity to provide any additional shareholder support as may be desired by Bharti Airtel from time to time,” Harjeet Kohli, Group Director, Bharti Enterprises, said in a statement.
Bharti Airtel’s promoter group, which comprises Sunil Mittal-owned entities and Singtel will continue to own a majority stake in Bharti Airtel at 56.23 %, even post-transaction.
“Bharti Group and Singtel, which are Airtel’s largest shareholders, remain committed to the business and the long term prospects of Airtel,” according to an official statement.
In the last few years, the promoters have invested over Rs. 21,000 crores or over $3 billion in Bharti Airtel and stay fully committed to investing further in the business as may be required.
Kohli added that the ‘the strong and wide response’ received from a diverse mix of investors across geographies, even during challenging global macro-economic conditions, demonstrates the competitive strength and the long term prospects of Bharti Airtel.
Brokerage firm Credit Suisse, in a note, said that while some investors may perceive the transaction negatively as a stake sale from the promoter, “we are not overly concerned about the same, as we view it more as a deleveraging exercise.” It added that the Sunil Mittal-led telecom operator is set to benefit from ongoing market repair in the sector.
“We see this stake sale by Bharti Telecom Limited a positive as it will make the promoter entity debt-free, in turn improving the flexibility for any support to Airtel in the future,” IIFL Securities said in a note.
With Bharti Telecom Limited becoming a zero debt company Bharti Airtel’s credit profile will also be augmented as it will stand to benefit from deleveraging on a consolidated basis including any debt of promoter holding company.
Bharti Airtel recently reported a 14% on-quarter growth in its India mobility business ARPU or average revenue per user – a key performance metric – to Rs 154 or $2.04 in the January-March period against Jio’s Rs 130.6 or $1.72 ARPU. Airtel has a higher market share in both the top-end postpaid and prepaid user segments in India.