SingTel Pays 54% Premium To Increase Stake In Bharti Telecom
SingTel’s fund infusion will help Bharti Airtel’s holding company deleverage.
Bharti Telecom Ltd. will sell shares to existing investor SingTel International Investments Pte. at a 54.4 percent premium as the parent of India’s largest carrier Bharti Airtel Ltd. looks to raise money to pare debt.
SingTel will subscribe to preferential shares at Rs 310 apiece, paying Rs 2,648.9 crore in all to increase its stake by 1.73 percent to 48.90 percent, according to its disclosure to the Singapore exchange. That compares with Rs 200.71, the price of each Bharti Telecom share based on the value of its stake in Bharti Airtel, according to BloombergQuint’s calculations (see table).
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Bharti Enterprises Ltd. will now hold over 50 percent in Bharti Telecom. SingTel, the single largest shareholder in Bharti Airtel, indirectly increased its economic interest in the telecom operator by 0.9 percentage points to 39.5 percent.
Shares of Bharti Airtel closed more than 4 percent higher today. That’s because the investment—the second by SingTel in two years—will help Bharti Telecom deleverage. The company had an outstanding debt of Rs 8,556 crore as on Jan. 19, according to Crisil.
“The outlook (of Bharti Telecom) will remain sensitive to movements in the share price and to the credit risk profile of Bharti Airtel Ltd., and more-than-expected debt contracted by Bharti Telecom Ltd.,” Crisil said in a January report.
Bharti Telecom’s biggest source of income to service its debt is dividend paid by Bharti Airtel, besides investments in liquid mutual funds. In fact, the carrier has paid Rs 3.84 a share so far in this financial year compared with Rs 1.36 last year.
It more than doubled the payout to Rs 750 crore. That compares with operating income of Rs 370 crore and profit after tax of Rs 326 crore in financial year ended March 2017, according to rating agency ICRA.
Debt Refinance
A large portion of the Bharti Telecom’s debt came from borrowings to buy 4.6 percent stake in the wireless carrier from Indian Continent Investment Ltd. in October last year. Bharti Telecom raised short-term debt of Rs 9,200 crore, mainly through commercial papers (including debt from group companies) to acquire the stake, according to rating agency ICRA.
The holding company raised Rs 6,000 crore via non-convertible debentures on Jan 8. to refinance its short-term debt along with Rs 1,000 crore of long-term bank loan facility, Crisil said.
Future Fund-Raising
Bharti Telecom received shareholder approval at its September meet to raise up to Rs 12,000 crore in one or more tranches, the company said in a filing with the Registrar of Companies. The funds raised through non-convertible debentures will be used to acquire shares of Bharti Airtel, it said seeking shareholder approval.
The Bharti Group, in an emailed statement, denied any immediate plans. “No such proposal is currently under consideration.”