Bharti Airtel, one of India's leading telecommunications companies, is in the process of engaging with top international banks, including Barclays (LON:BARC) and Citi, to raise $1 billion. This capital injection aims to address its spectrum liabilities from the 2015 auction, which amount to nearly ₹12,000 crore. The company is exploring options such as offshore bonds, non-convertible debentures (NCDs), or mutual funds to optimize capital generation as it embarks on a nationwide deployment of 5G services.
The telecom giant, helmed by Sunil Mittal, is considering this financial move to reduce its annual interest costs and strengthen its balance sheet. The fundraising discussions will determine the specific financial instruments and their pricing structures to be used for this initiative. Bharti Airtel also has the flexibility to tap into unutilized rights issue proceeds, having raised only ₹5,247 crore from a planned ₹21,000-crore rights issue two years prior.
CFO Soumen Ray highlighted during the September quarter earnings call that the company still owes between ₹10,000-12,000 crore for the spectrum acquired in 2015. The initial cost of this spectrum was ₹29,130.2 crore with an upfront payment of ₹7,832.6 crore and subsequent installments due in March (₹8,815 crore) and July (₹8,025 crore). By substituting high-cost spectrum debt with more affordable market borrowings, Bharti Airtel has already achieved a marginal reduction in net debt to ₹2.07-lakh crore as of July.
Investors have responded positively to these strategic financial decisions. Following the announcement of these plans, Bharti Airtel's stock saw an appreciation of 1.49% on the Bombay Stock Exchange (BSE).
InvestingPro Insights
As Bharti Airtel gears up for its 5G rollout and works on strengthening its financial position, certain metrics and insights from InvestingPro provide a clearer picture of the company's current market performance. The telecom giant has seen a significant 1-week price Total Return of 5.16%, showcasing a positive short-term investor response. Over a longer horizon, Bharti Airtel's 1 Year Price Total Return stands at an impressive 137.27%, reflecting strong market confidence and growth potential.
InvestingPro Tips reveal that Bharti Airtel's free cash flow exceeding net income indicates high earnings quality. This financial stability supports the company's ability to continue dividend payments, an attractive aspect for income-focused investors. Additionally, the stock is trading near its 52-week high, which could signal a robust market sentiment towards the company's future prospects.
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