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Airtel to raise $3 billion, prepares for scenario where it needs to pay Rs 35,586 crore AGR dues

On November 22, Bharti Airtel filed its review petition in the SC seeking waiver of interest, penalty and interest on penalty, which comprises around 75% of the due amount.

The Bharti Airtel board on Wednesday cleared a proposal to raise $3 billion as the company prepares for a scenario where it needs to pay Rs 35,586-crore adjusted gross revenue (AGR) dues by January 24, 2020. The outcome of Bharti’s limited review petition in the Supreme Court seeking waiver of interest, penalty and interest on penalty, which constitute 75% of the total due amount, is still awaited.

The company proposes to raise $2 billion through sale of shares and convertible bonds. Another $1 billion would be raised through issuance of unsecured and/or secured, listed and/or unlisted, foreign currency convertible bonds (FCCBs) or other similar security denominated in foreign currency, or a combination thereof. The funds would be raised in one or more tranches on private placement basis or otherwise.

The firm may also issue unsecured and/or secured, listed and/or unlisted, redeemable non-convertible debentures along with warrants or other similar security denominated in rupee or combination thereof in one or more tranches for raising this money.

The board has also authorised the special committee of directors for taking necessary steps for implementing these proposals. On November 14, while declaring its July-September quarter results, Bharti had provisioned around `28,000 crore towards its AGR-related dues arising out of the Supreme Court’s October 24 order which upheld the department of telecommunications’ methodology of computing AGR for payment of licence fees and spectrum usage charges.

The company posted its biggest consolidated net loss at Rs 23,045 crore for the July-September quarter as a result of this provisioning. On November 22, Bharti Airtel filed its review petition in the SC seeking waiver of interest, penalty and interest on penalty, which comprises around 75% of the due amount.

Analysts had said that the success of the fund-raising exercise would depend much on the kind of tariff hike the company undertakes in the near term. Both Bharti Airtel and Vodafone Idea announced tariff hikes of up to 50% on their pre-paid plans, which took analysts by surprise who were expecting hike in the range of 10-15%. As a result of the hikes, Arpu (average revenue per user) is expected to get an uplift of Rs 25-30, while Bharti Airtel’s operating income will get an incremental boost of Rs 7,000-Rs 8,500 crore, according to analysts at Kotak Institutional Equities.

Also, analysts at Goldman Sachs said that Bharti’s revenues could potentially be 12% higher on consolidated level versus Q2FY20 (Rs 21,131 crore), with Ebitda expected to be higher by 26% on consolidated level. Bharti had reported Rs 8,936 crore of Ebitda in the second quarter.

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Source: Financial Express