NEW DELHI : The promoter of Bharti Airtel Ltd will sell shares worth $1 billion in the mobile operator through a block deal on Tuesday, two people said on condition of anonymity.
The promoter, Bharti Telecom Ltd, will sell a 2.75% stake in the company at a floor price of ₹558 per share, the first person said. The floor price is at a discount of 6% to Bharti Airtel’s stock price. On Friday, the company’s shares ended at ₹593.20 on the National Stock Exchange (NSE), falling 0.2% from the previous day’s close. The market was shut on Monday for Ramzan.
“This will help in cleaning up debt and, post-deal, debt will be zero at the promoter level. This debt was taken to buy a stake in Airtel," the second person said, adding that the stake sale will also create capacity at Bharti Telecom for further capital or shareholder support for the operator.
The sale will also improve Bharti Airtel’s ratings, he added. The block deal of around 150 million shares will be conducted by JPMorgan India Pvt. Ltd as the promoter’s sole placement agent for the secondary market sale.
Post-deal, the stake held by Bharti Airtel promoters—Bharti Telecom Ltd, Indian Continent Investment Ltd, Viridian Ltd and Pastel Ltd—will fall from the existing 58.98% to 56.23%, according to information on the NSE website. “The stock price has risen significantly recently, and most investors’ outlook on the stock is also positive. So, this may be a good time to sell," an analyst with a domestic brokerage said on condition of anonymity.
Over the last three years, Bharti Airtel had been aggressively raising funds through rights issues, qualified institutional placements (QIPs) and issue of foreign currency bonds, among others, for its working capital requirements amid a brutal tariff war in the Indian telecom sector.
In May 2019, the mobile operator had raised ₹25,000 crore through a rights issue and another ₹7,000 crore through a foreign currency perpetual bond issue to build large network capacity.
In January, it had raised $3 billion through a QIP and an overseas bond to repay government dues. The company was also impacted last October by a Supreme Court judgement directing the company to pay ₹35,586 crore in dues related to adjusted gross revenues.
However, some green shoots are visible now, with December’s tariff increase substantially improving the financials of its consumer mobile operations in the March quarter.
Bharti Airtel’s consumer mobile operations posted an operating profit of ₹26.5 crore during the quarter on account of a tariff increase in December.
The other positive, going forward, will be the moderation in capital expenditure on its India mobile operations, once the company frontloaded investments on its network. This was highlighted by Gopal Vittal, Bharti Airtel’s chief executive officer for India and South Asia, in an investor conference call last week.
The anticipation of stronger earnings has also boosted Bharti Airtel’s stock, which has jumped almost 10% since reporting its quarterly earnings last week.
The merger of its tower arm, Bharti Infratel, with Indus Towers, which is expected to complete next month, could turn out to be a positive news for Bharti Airtel.
In September, Mint had reported that the Sunil Mittal-led mobile operator is exploring the option of selling stake in its tower infrastructure business to private equity funds once the merger is complete.
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