Bharti Airtel promoters raise $1 Bln via OFS

Sunil Bharti Mittal owned Bharti Airtel promoters have decided retire the debt on their personal books by selling a small slice of their shareholding in the India’s largest listed telecom company.
Bharti Telecom, which holds 38.8% in Airtel, sold 152 million shares for about Rs 8,500 crore in a block deal on Tuesday. Bharti Telecom had debt worth Rs 8,500 crore on its books at the end of March which was taken to fund two stake purchases in November 2017 and May 2019.

The deal is one of the largest follow-on offerings in the country this year. Bharti raised $3 billion in January from the sale of shares and convertible bonds to help pay additional airwave and license fees after telecom operators lost a court case.

The fact that the shares were sold at a time when the Airtel stock was at an all-time high is an added bonus. Airtel shares have risen sharply this month, after it reported a huge jump in average revenue per user (Arpu) and revenues for the March quarter. As pointed in this column, this resulted in massive market share gains vis-a-vis Reliance Jio Infocomm Ltd, whose Arpu grew only marginally.

Bharti Airtel on May 18 reported a net loss of Rs 5,237 crore for the quarter ended March 2020. It had posted a consolidated loss of Rs 1,035.3 crore in the December quarter and profit of Rs 107.2 crore in March quarter 2019.
Meanwhile, with the latest block deal for a 2.75% stake sale, the promoter and promoter group shareholding in the telco would come down to 56.23% from the current 58.98%.

While a stake sale by promoters is usually construed negatively by investors, we believe this stake sale is mainly to de-lever Bharti Telecom and hence this is not a negative for the company
The Bharti stock has seen a sharp correction of 6% to Rs 559 levels (same as the OFS price of 558) on this announcement but we believe that Bharti Airtel will be a key beneficiary of the rising tariffs and ongoing consolidation in the Indian telecom space going ahead.

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