Bharti Airtel to Raise Rs16,500 cr via NCD, foreign currency bond sales

Bharti Airtel Ltd on Monday said its board has approved a plan to raise Rs16,500 crore by selling non-convertible debentures and foreign currency bonds. The proceeds will be used to refinance borrowings and pay spectrum-related dues to the government.

Though Bharti has been raising funds for the last one year, Monday's enabling approval to raise funds is its largest in a single meeting.

''Subject to approval of shareholders and other requisite approvals, the board of directors in its meeting held on Monday has approved the issuance of NCDs of up to Rs10,000 crore on a private placement basis in such tranches/series and at such rates as may be approved from time to time on a cumulative basis along with all NCDs issued by the company, and the issuance of foreign currency bonds up to a limit of $1 billion (Rs6,482 crore) or equivalent in one or more tranches,'' it said in a regulatory filing.

The country's largest telecom operator has in the last one year announced several measures to trim debt and defend its business under an onslaught from newest entrant Reliance Jio. The Mukesh Ambani-controlled company hit the revenue streams of rivals, first through free offerings and later through cut-price data tariffs.

Bharti Airtel's net profit plunged 39 per cent to Rs306 crore in the three months ended 31 December, as India's telecom regulator more than halved interconnection usage charges, levied by mobile networks handling incoming calls from rival networks.

According to a Mumbai-based analyst cited by Mint, the borrowing does not fundamentally change anything for Bharti Airtel, and the company is merely refinancing debt. ''Nothing changes. Also, interest rates are rising overall; so, maybe they want to raise funds right now before cost of borrowing goes up further,'' this analyst said on the condition of anonymity.

Bharti Airtel's consolidated net debt also increased to Rs91,714 crore as of 31 December from Rs91,480 crore in the previous quarter. Its net debt excluding the deferred payment liabilities to the department of telecommunications and finance lease stood at Rs44,677 crore, which implies that its spectrum related obligations to the telecom department stood close to Rs47,037 crore as of 31 December.

The company has an immediate upcoming payment to make for bonds worth €1 billion (which it previously issued at 4 per cent annual coupon rate) which are due to mature in 2018.

The company, which is already mulling an initial public offering for the African unit, has also taken several steps as part of its debt-reduction spree. Airtel recently announced that Singapore Telecommunications Ltd will indirectly raise its stake in it by investing Rs2,649 crore in Bharti Telecom Ltd, the promoter firm, through a preferential allotment of shares. The money will be used to reduce debt.

In December Airtel had said that it, along with another group entity, will sell a combined 20 per cent in its satellite television unit Bharti Telemedia Ltd to private equity firm Warburg Pincus for $350 million. Airtel last year also said it may sell a controlling stake in tower arm Bharti Infratel Ltd. Bharti Airtel and its wholly owned arms own 53.51 per cent in the tower firm at present.

In the last year or so, Bharti has been raising funds by reducing its stake in its tower arm, Bharti Infratel. Through a series of small stake sales in Infratel it has raised around Rs12,089 crore so far. In October 2017 it announced a major deleveraging exercise when it had said that it has received a recommendation from its committee of directors (CoD) to sell its controlling stake in Bharti Infratel to a clutch of global investors.

Bharti Airtel and its arms had said that they have been approached by a few reputed global investors for acquiring controlling stake in Infratel and since the CoD has recommended that the proposal be considered, the board will evaluate the offers. By this exercise Bharti can raise around Rs40,000 crore, according to some estimates.

The larger plan is that once Bharti Infratel acquired Indus, the clutch of PE players would acquire Infratel and Bharti would exit the tower business and use the funds to pare its debt and expand its Volte network across the country.