Airtel rights issue of Rs 25,000 crore over-subscribed

Bharti Airtel on Friday informed stock exchanges that the company’s rights issue of up to INR 249,390 million has been over-subscribed.
Airtel annual report 2017-18Airtel’s rights issue closed for subscription on May 17, 2019 after opening on May 3.

Airtel is aiming to continue investments in future roll-outs to build large network capacity across India.

Airtel received commitment from its single-largest shareholder Singtel, promoters, and GIC Singapore to participate in the Rs 32,000-crore capital raising program.

The rights issues of $3.5 billion and additional $1 billion perpetual further strengthens the capital structure of Bharti Airtel.

Traders have noted that the ex-rights price in stock market continues to trade at a very high premium to rights price.

Even the renunciation premium for the right’s was running almost for the full difference rights price to current price. Unlike other recent rights transaction where such rights were running at 60-80 percent discount to the difference of rights and current price.

Investors have noted that the attractive pricing decision by Airtel upfront was a rare decision in recent times. The pricing of the rights issue was investor friendly and reflects Airtel’s long term strategic view on the business and opportunities across space.

Singapore telecom major SingTel earlier said it will infuse Rs 3,750 crore in Bharti Airtel by subscribing to the proposed Rs 25,000 crore rights issue of the company, while GIC, on behalf of Singapore government and the Monetary Authority of Singapore, has made a commitment of Rs 5,000 crore in the proposed program.

S&P Global Ratings earlier said Airtel’s rights issue of up to Rs 25,000 crore was not enough to stabilise its credit rating.

The rating agency said that there is negative outlook, an indication of rating downgrade, which looks at renewed competition and higher capital spending by the company that will keep its debt level up.

In addition to enhance spending on network expansion, Airtel will be trying to reduce its debt.  The net debt of Bharti Airtel at the end of the third quarter of 2018-19 stood at Rs 1.06 lakh crore.

S&P Global Ratings’ credit analyst Ashutosh Sharma said Airtel’s higher Capex over the past few years have weighed on its debt capacity. The company may complete its 4G-rollout over the next two to three quarters.

Moody’s Investor Service said that the Airtel’s rights issue was credit positive as it will enable the company to pare debt and improve liquidity. Moody’s said it expects a significant portion of proceeds from the rights issue to be used to lower debt, strengthening Airtel’s balance sheet and providing the company with greater financial and operational flexibility for its Indian operations.