) is believed to have cleared Bharti Airtel’s upcoming Rs 25,000 crore rights issue, a person familiar with the matter said, paving the way for India’s second-largest telco to raise funds to bolster its balance sheet and get the necessary headroom to spend more on 4G networks to take on Reliance
“Sebi had cleared the Bharti offer,” a person privy to the development said.
Axis Capital is understood to be coordinating the rights issue for the Sunil Mittal-led telco.
“The company is in the process of obtaining requisite approvals and shall make necessary announcements at an appropriate time,” a Bharti Airtel spokesman said in a written response to ET’s queries.
At press time, Sebi did not reply to ET’s queries.
In late-February, Bharti Airtel’s board had approved plans to raise Rs 32,000 crore through a mix of equity and bond sales in one of the largest such exercises by an Indian company. Of this, Rs 25,000 crore will be raised by way of a right issue and another Rs 7,000 crore will be garnered through foreign currency perpetual bonds.
Airtel’s stock closed 0.64% down at Rs 354.30 on BSE on Monday.
The company’s rights issue is aggressively priced at Rs 220 per share, or a discount of over 30% from the February 28 closing price of Rs 317.95 on BSE. The company will issue 1.14 billion shares, increasing its equity base by over 22% to 5.13 billion equity shares. The rights entitlement ratio has been pegged at 19 shares for every 67 held.
The Singapore government’s investment arm GIC Pvt Ltd will invest Rs 5,000 crore ($700 million) to pick up around 4% stake in Bharti Airtel by subscribing to the issue. That’s by way of a portion of the stock entitlement of promoter group entity, Bharti Telecom.
The Bharti Airtel promoter group, including Bharti Telecom will subscribe to shares worth Rs 11,785.7 crore, with the rest going to the public.
Singtel has said it will subscribe to 170 million new shares in the issue for Rs 3,750 crore ($525 million), representing its 15% direct stake in the telco. It holds shares in Airtel directly and through its 48.9% effective interest in Bharti Telecom, which in turn, holds a 50.1% stake in the Sunil Mittal-led telco. The Mittal family’s effective interest in Bharti Telecom is 51.1%.
The Singaporean telco has said its effective interest in Airtel will drop to 35.2% – from 39.5% now – with the renunciation to GIC and upon closing of the rights issue but would continue to be the single largest shareholder in Airtel.
Insiders estimate the Singtel-Mittal family combined holding will dip to around 63% from 67.14%. The Mittal family will maintain its stake at around 27%.
Airtel’s objective is to cut debt and financing costs and boost cash flows to meet capex needs to engage meaningfully in the price war fomented by Mukesh Ambani-led Jio.
Bharti Airtel has net consolidated debt of Rs 1.15 lakh crore, of which the Indian operations’ borrowings amount to about Rs 80,000 crore. This includes outstanding spectrum payments of nearly Rs 46,000 crore. Bharti Airtel’s consolidated net debt to ebitda (earnings before interest, taxes, depreciation, and amortisation) is 4.2x.