Bharti Airtel Ltd on Monday said its board has approved a plan to raise as much as Rs16,500 crore by selling non-convertible debentures and foreign currency bonds to refinance borrowings and pay spectrum-related dues to the government.
“Subject to the approval of the shareholders and other requisite approvals, the board of directors in its meeting held today approved the issuance of non-convertible debentures (NCDs) of up to Rs10,000 crore on a private placement basis in such tranches and at such rates as may be approved from time to time on cumulative basis along with all NCDs issued by the company; and issuance of foreign currency bonds up to a limit of $1 billion or equivalent in one or more tranches,” the company said in a filing to stock exchanges.
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% 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, and the pricing war triggered by Jio’s entry continued unabated.
According to a Mumbai-based analyst, 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% 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% 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% in the tower firm at present.
Meanwhile, rival Idea Cellular Ltd too has raised funds to build a war chest for the battle in the telecom sector. The promoters of Idea—Birla TMT, Elaine Investments, Oriana Investments—have already invested Rs3,250 crore to strengthen its balance sheet amid intense competition and before a planned merger with Vodafone India Ltd. Following this equity infusion by Idea’s promoters, their stake in India’s third largest telecom operator will rise to 47.2% from 42.4% now. Idea Cellular has also raised Rs3,500 crore by way of a qualified institutional placement, or QIP, last month.