Bharti Airtel shares fell over 4% in intraday trade on the Bombay Stock Exchange (BSE) on Tuesday after credit-ratings agency ICRA downgraded the company's long-term ratings from 'AA' to 'AA-'. The rating agency attributed the rating downgrade to the recognition of higher than anticipated provision pertaining to the Supreme Court judgement on dues of Rs 92,000 crore, payable towards license fees on adjusted gross revenues (AGR) as well as spectrum usage charge in the latest quarterly results.
Following the rating downgrade, Bharti Airtel share price fell 4.72% to an intraday low of Rs 430 on the BSE, against the last closing price of Rs 451.30. The fall in Airtel's share price is in-line with 'Telecom Provider' sector on the BSE, that has fallen by 4.79% on Tuesday.
Bharti Airtel shares have fallen 1.72% in one week, while it gained 14% in a month and 50% on a year-to-date basis.
In terms of volume, 10 lakh shares and 234 lakh shares changed hand on BSE and NSE counters. Market depth data on BSE suggests 48% buyers bidding against 52% sellers offering the stock.
"The sizeable payment of AGR related charges post the latest judgement by apex court leading to addition in debt, deterioration in operating metrics on a sustained basis and delay in divesting of the stake in Indus-BIL combined, leading to a debt of more than 4 times on a sustained basis can move the rating downwards," ICRA said in a release.
Icra said the ratings continue to remain under watch with negative implications. Further, additional provisioning related to indemnities to be paid to certain investors of Airtel Africa is also a credit negative, the rating agency added.
"Moreover, larger than expected debt-funded capex or spectrum acquisition can also push the rating downwards," it said.
"Although the company has not tied up funds for the same, this liability if materialises is expected to be funded through a bridge loan, which would result in deterioration in debt coverage metrics in the near term.
The rating firm, however, said that the government-announced interim relief for deferment of auction installments for FY2021 and FY2022 is expected to provide cash flow easing to the tune of Rs 5,500 crore per year for the next two years. This event coupled with the outcome of the company's review petition to the apex court and recently announced tariff-hikes that would allow OPBITDA expansion can help resolve the rating watch.
ICRA added that clarity on the AGR issue in terms of payment terms and the funding mix of the same would be critical for the resolution of rating watch.
Shares of Airtel closed 4.34% or 19.60 points lower at Rs 431.70 on the BSE today.