Airtel promoter arm to raise Rs 1,380 cr, to participate in the rights issue

MUMBAI | KOLKATA: Bharti Telecom (BTL), a holding company of Bharti Airtel’s promoters, is raising around Rs 1,400 crore via corporate bonds in the local money markets to help it mainly participate in the telco's ongoing Rs 21,000 crore rights issue, and also refinance some high-cost debt, two people aware of the matter told ET.

The bonds were up for bidding on Monday on the exchange platform. Barclays is the solo bidder/investor in those papers, market sources said.

"It is not yet clear if they will down-sell a portion of their subscription as they were only involved in the fundraising," one of the people said.

Barclays and Bharti did not respond to ET’s queries till press time Monday.

BTL’s local bonds have three sets of maturities: 12 months, 24 months and 36 months, and are offering interest rates of 6.42 per cent, 5.10 per cent and 5.85 per cent, respectively.

“The money raised by BTL via bonds can be used by both Bharti Enterprises and Singtel to participate in the Airtel rights issue,” a person with direct knowledge said.

Analysts estimate that Bharti Airtel’s ongoing rights issue requires its promoters, SingTel and Bharti Enterprises of the Mittal family, to contribute around Rs 6,661 crore and Rs 5,067 crore respectively. Of this, their immediate 25 per cent upfront contributions work out to Rs 1,665 crore and Rs 1,267 crore, respectively.

Bharti Enterprises and SingTel own 50.56 per cent and 49.44 per cent, respectively, in BTL, which in turn owns 35.80 per cent of Bharti Airtel.

Airtel’s promoter group — the Mittal family and SingTel — hold nearly 56 per cent of the telco with the rest held by the public. The Mittal family, directly and indirectly, owns around 24.13 per cent while SingTel holds 31.72 per cent in Airtel.

Airtel’s shares closed 0.8 per cent lower at Rs680.45 on the BSE Monday.

Overall, the interest rate sentiment is changing with the Reserve Bank of India pursuing liquidity normalisation. Companies are rushing to raise funds via bonds after the RBI took steps to cut easy money in its bi-monthly policy earlier this month, resulting in an uptick in rates, ET reported on October 11.

Subscribers to the Airtel rights issue — which opened on October 5 and closes on October 21 — need to pay 25 per cent on application and the rest in two additional calls as may be decided by Airtel’s board, though within 36 months. Airtel shareholders will receive one share for every 14 held in the telco at Rs 535 a unit, implying a 7 per cent dilution.

Airtel has said its promoter and promoter group will collectively subscribe to the full extent of their aggregate rights entitlement — or in proportion to their shareholdings in the company. In addition, they will also subscribe to any unsubscribed shares in the issue.

Sunil Mittal-led Airtel plans to use the rights issue proceeds to reinforce its balance sheet and build a war chest to clear its statutory dues, expand 4G networks and prepare for an upcoming auction of 5G airwaves.

Rating firm S&P Global had recently said it expects Airtel’s ongoing fundraising via rights issue to alleviate the likely impact on its finances from the upcoming 5G spectrum liabilities, which, it said, was necessary for the telco’s competitiveness. It had added that the rights issue also signalled proactive leverage management.