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Bharti Airtel will raise up to Rs 16,500 crore by floating privately placed non-convertible debentures (NCDs) and a foreign currency bonds. In a meeting of its board, the company approved issuance of NCDs worth Rs 10,000 crore and foreign currency bonds up to a limit of US $1 billion or roughly Rs 6,500 crore. NCDs are debt papers that a company issues for a specified tenure where it pays a fixed interest on the investment.
The money raised will be used to refinance existing debt and spectrum liabilities, Airtel said. The telco plans to obtain fresh approval from stakeholders for issuing NCDs. Its previous approval for NCDs up to Rs 10,000 crore is valid for a year until March 13, 2018. This is the largest-ever fund-raise approved by Airtel’s Board of Directors in a single meeting, said Telecomtalk info.
The board of directors approved the issue of foreign currency bonds of up to $1 billion (Rs 6,482 crore) and sought fresh shareholder approval for issuance of non-convertible debentures of up to Rs 10,000 crore on a private placement basis, Airtel said in a filing with the BSE on Monday. The bonds and debentures may be issued in one or more tranches.
“Any funds raised from issuance of aforesaid debt securities shall be used for routine treasury activities, including refinancing of existing debt and spectrum liabilities,” said the company, which is 39.5% owned by Singapore Telecommunications. Bharti Airtel’s consolidated net debt stood at Rs 91,714 crore at the end of December.
A company official said this is the largest fund-raising plan approved by the Bharti Airtel board in a single meeting. The funds, to be raised over a period of time, will help shore up the balance sheet of India’s largest telecom company striving to fight off brutal competition from Reliance Jio Infocomm, which has severely dented revenue and profit.
Airtel shares gained 4.7% to Rs 420.75 at the close on the BSE. The mobile phone operator said its previous approval for raising up to Rs 10,000 crore via NCDs was valid till March 13, 2018, and needed fresh shareholder consent.
“Airtel’s move could be aimed at rationalising treasury costs,” said Prashant Singhal, TMT head for emerging markets at EY, adding that the market leader’s plan to float overseas bonds made sense “since foreign borrowings would work out cheaper than domestic rupee loans, especially with a stable US dollar.”
Airtel’s preference to raise funds through debt “is possibly triggered by the fact that equity financing is more expensive, coupled with the fact that the equity raising process itself is more cumbersome,” said an analyst at a global brokerage who did not wish to be identified.
Banks, cautioned by the Reserve Bank of India, have been wary of lending to a sector that’s burdened with debt of almost Rs 8 lakh crore amid competition that has forced smaller telcos to exit the business and some to head for bankruptcy.
Bharti Airtel has so far “issued or guaranteed issuances of multiple long-dated bonds across the US dollar, Euro and Swiss franc to raise the equivalent of $6.2 billion,” according to the telco’s website. These bonds are spread across maturities ranging from five to 10 years.
Over the past year, Airtel has raised almost Rs 12,089 crore by progressively reducing its stake in its listed tower unit, Bharti Infratel, to cut debt and free up cash and gird up for competition with Jio. The company said recently it may sell a much larger stake in Bharti Infratel, in which it owns 53.51%.
SingTel invested Rs 2,649 crore recently in the company, which plans to spend Rs 25,000 crore in this financial year to expand 4G operations.
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