Bharti Airtel disclosed details of its proposed Rs 32,000 crore rights issue in a regulatory filing today. This is not only the telco's largest capital infusion plan but also among the largest such exercises ever undertaken by a domestic company. Last week, Airtel's board had approved plans for a rights issue to raise up to Rs 25,000 crore through issuance of fully paid up shares at a price of Rs 220 per share and to raise an additional Rs 7,000 crore through Foreign Currency Perpetual Bond Issue.
The company is in the process of appointing banks to execute this. The promoters of Bharti Airtel along with Singapore government's investment arm GIC Private Ltd will subscribe to over half of the proposed rights issue in a bid to infuse funds in the company.
"The entire rights entitlement of promoter and promoter group of approximately Rs 167,857 million (Rs 16,785.7 crore) will be subscribed by them and GIC," Airtel informed the exchanges.
Its statement added that the promoter and promoter group will subscribe to Rs 11,785.7 crore and GIC will subscribe to shares worth Rs 5,000 crore by way of renouncement in their favour. GIC has confirmed to subscribe to this renounced entitlement on behalf of Government of Singapore and Monetary Authority of Singapore.
Another promoter, Singapore Telecommunications Ltd (Singtel), said it will infuse Rs 3,750 crore in the telco by subscribing to the rights issue. The company announced that "it will subscribe to 170 million new shares" representing the rights entitlement "for its direct stake of 15%".
With this, Singtel's effective interest in Airtel will be 35.2% and the company will continue to be the single largest shareholder in the country's second largest telecom company. "The promoter and promoter group also reserves the right to subscribe either itself or through investors for additional shares in the Issue, including in the event of under-subscription by public, in accordance with the applicable laws," the statement added.
According to Gopal Vittal, MD and CEO (India & South Asia), Bharti Airtel, the rights issue will further strengthen the company's balance sheet "with desired financial flexibility so as to meet future opportunities, particularly in the rapidly transforming Indian mobile market."
He added that the fresh capital infusion will help the company to continue investments in future rollouts to build large network capacity as well as create content and technology partnerships to ensure the best customer experience. Moody's Investor Service believes that the proposed rights issue is "credit positive" as it will enable the company to pare debt and improve liquidity.
In the statement the credit rating agency said it still expects a significant portion of proceeds from the rights issue to be used to lower debt, strengthening Airtel's balance sheet and providing the company with greater financial and operational flexibility for its Indian operations.
However, S&P Global Ratings has said the rights issue is not enough to stabilise Airtel's credit rating. The rating agency said there is a negative outlook, an indication of the rating downgrade, which looks at renewed competition and higher capital spending by the company that will keep its debt level up.
On the other hand, if it is successful, the move will "go a long way in restoring Bharti's balance sheet and shoring up leverage". Airtel's net debt stood at over Rs 1 lakh crore at the end of the third quarter of the current fiscal.
With PTI inputs