The country's largest telecom player Bharti Airtel is set to land Rs 2,649 crore investment from Singapore-based telecom operator and longtime partner Singtel at a time when the Sunil Mittal-led firm has gone through consecutive quarters of plunging profits due to the price war unleashed by Mukesh Ambani-run Reliance Jio.
Airtel said in a statement that it would use the money to reduce its debt, which has piled up to Rs 91,714 crore as of December 2017. Its consolidated net debt stood at Rs 91,480 crore in the September quarter.
Singtel International Investments will invest the sum in Bharti Telecom, raising its stake in Airtel's holding company to 48.9 per cent from 47.17 per cent. Bharti Enterprise will continue to hold over 50 per cent stake in Bharti Telecom. The preferential allotment of shares which is expected to be closed by March 2018 would allow SingTel to raise its 'economic interest' in Bharti Airtel by 0.9 per cent to 39.5 per cent.
Singtel will be allotted up to 85,450,000 new equity shares in Bharti Telecom at an issue price of Rs 310 per equity share. This will increase Singtel's stake in Bharti Telecom by up to 1.7 per cent for an aggregate consideration of approximately Rs 2,650 crore, Singtel said in a statement. Bharti Telecom held 50.1 per cent stake in Bharti Airtel at the end of 2017.
After the transaction, promoters holding in Bharti Airtel will be 27.08 per cent. "Airtel shares a nearly two-decade-long relationship with Singtel, which has only become stronger over the years. The fresh round of investment highlights the confidence of Singtel in Airtel, and the increased attractiveness of the Indian telecoms sector following the recent consolidation," said Bharti Telecom managing director Deven Khanna.
The investment comes within a span of two years of Singtel's participation in Bharti Telecom's rights issue of Rs 2,500 crore, which was completed in February 2016. "While there are currently headwinds in India, we take a long-term view of our investment in Airtel which continues to be a strong market leader in a region with rapidly increasing smartphone penetration and mobile data adoption," said Singtel CEO International Arthur Lang.
Airtel's shares rose by over 4 per cent on Monday after the investment announcement, making it the biggest gainer on both BSE and NSE. The scrip gained 4.20 per cent to end at Rs 439.50 on BSE. On NSE, shares of the company closed with a gain of 4.22 per cent at Rs 440.20. The company's market valuation rose by Rs 7,075.73 crore to Rs 1,75,685.73 crore.
Incumbent telecom players in the country are going through a debilitating financial period after being forced into a raging price war as latest entrant Reliance Jio has disrupted the space with free voice and dirtcheap data offers.