04 Sep , 2021 By : Kanchan Joshi
MUMBAI: Moody's believes Bharti Airtel’s fresh capital raise will 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.
“The transaction is credit positive for Bharti," it said.
It expects 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.
On 30 August, Bharti Airtel announced that its board has approved the raising of fresh capital through a rights issue of up to Rs21,000 billion ($2.84 billion). Bharti said it will raise the equity with quarter of the proceeds received upfront and the remaining in two tranches over the next three years.
Bharti's adjusted debt/Ebitda was 3.7x for the 12 months ended on 30 June 2021. Ebitda stands for earnings before interest, taxes, depreciation, and amortization. The capital raising, it said, also provides Bharti with more financial capacity to leverage its network in the Indian mobile space, as competition eases and tail winds from higher data usage and increases in average revenue per user (ARPU) benefit Ebitda and margins.
“We view the transaction as credit neutral for Bharti's 31.7% shareholder, Singapore Telecommunications Ltd (Singtel). Singtel can subscribe to its portion of the rights without a significant increase in leverage. Singtel's 31.7% ownership includes a direct stake of 14% and indirect ownership through Bharti Telecom Ltd," the rating agency said.
According to the terms of the rights issuance, Singtel will be required to pay 25% 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.
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