Bharti Airtel Ltd., Vodafone India Ltd. and Idea Cellular Ltd. sim card packs are arranged for photograph in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

Bharti Airtel To Raise Up To Rs 32,000 Crore To Pare Debt 

Bharti Airtel Ltd. plans to raise nearly Rs 32,000 crore (around $4.5 billion) to pare debt as India’s second-largest telecom company fights a tariff war sparked by Reliance Jio Infocomm Ltd.

The Sunil Mittal-controlled company will raise up to Rs 25,000 crore through a rights issue and another Rs 7,000 crore through foreign currency-denominated perpetual bonds, it said in an exchange filing. The rights issue will be priced at Rs 220 apiece—priced at a discount of 31 percent to Thursday’s closing price of Rs 319—with an entitlement ratio of 19 shares for every 67 held.

Bharti Airtel To Raise Up To Rs 32,000 Crore To Pare Debt 

A perpetual bond is a fixed income security with no maturity date, which means that Bharti Airtel will only have to service interest payments linked to the bonds. The amount raised won’t form a part of debt.

The fundraise could reduce Bharti Airtel’s debt by 30.5 percent, according to BloombergQuint's calculations. Its leverage ratio is expected to fall to 2.9.

Why This Deal?

The fundraise was essential for India’s second-largest telecom operator as its liabilities for the ongoing financial year is more than thrice the average cash generated by it in the last decade, according to data compiled by BloombergQuint. Its credit rating was downgraded for the first time, by Moody’s, by one notch to Ba1 from Baa3, which cited intense competition in the Indian telecom market.

Bharti Airtel is locked in a tariff war that was triggered by Reliance Jio, led by Asia’s richest man Mukesh Ambani, which first offered free data followed by cheaper tariffs. That hurt Bharti Airtel’s profitability and revenue, pushing up its debt and leverage.

The mobile operator spent close to Rs 22,500 crore on capital expenditure in the first nine months of the current financial year and plans to spend another Rs 4,500 crore over the remainder of the period. This is Bharti Airtel’s fourth attempt to pare debt: in the past two years, the company made nearly Rs 23,000 crore by selling stakes in its tower arm, direct-to-home business and Africa business.

Mittal in an interview with BloombergQuint had said the company may sell fresh shares, list its profitable Africa business and divest non-core assets to raise funds.