Bharti to Buy Back Digital Stake From Warburg for $430 Million

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Bharti Airtel Ltd., India’s second-largest wireless operator, will buy back a 20% stake in its digital unit from Warburg Pincus for 31.3 billion rupees ($430 million) to regain control of the company and study options to unlock value.

The carrier, controlled by billionaire Sunil Mittal, will pay Warburg Pincus in cash and shares of the flagship firm in return for the Bharti Telemedia Ltd. stake, it said in exchange filings Wednesday. It will also set up a panel to look at reorganizing its non-telecom operations.

Bharti’s restructuring plan follows a familiar strategy adopted by its larger rival, Mukesh Ambani’s Reliance Industries Ltd., which also reorganized its digital assets in 2019 -- a move that helped it lure $20 billion last year through stake sales to global giants including Facebook Inc. and Google. Asset sales will help Bharti, which posted a surprise turnaround in the most recent quarterly earnings, pare debt and bolster its balance sheet.

Key Details:
  • Bharti Airtel will issue 36.5 million of its shares to Warburg affiliate Lion Meadow Investment Ltd. at 600 rupees each, compared with the closing price of 593.85 rupees on Wednesday
  • It will also pay 10.4 billion rupees in cash

Mittal told the Economic Times newspaper this month that Bharti wants to develop the digital unit into a parallel entity that can explore bringing in investors after scaling up. The tycoon plans to create a step-up entity that can become the holding company for both the listed flagship Bharti Airtel as well as Airtel Digital, according to the report.

Bharti reported the highest quarterly profit since 2016 earlier this month, topping all analyst estimates, boosted by a jump in new customers as well as improving revenue from each user. Its shares have advanced almost 17% this year, surpassing the rise in benchmark S&P BSE Sensex.

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