NEW DELHI: Bharti Airtel has said that its Rs 25,000-crore rights issue was over-subscribed, with Singapore government arm GIC picking up a 4.4% stake, paving the way for the telco to bolster its balance sheet and invest in expanding its 4G network to take on Reliance Jio and Vodafone Idea.
Funding from the issue and additional $1 billion, or Rs 7,000 crore funding from perpetual bonds will be used by the country’s No. 2 carrier for expanding its 4G networks to match that of Reliance Jio’s, so as to gain an edge in a highly competitive market.
“Based on preliminary information received, the rights issue has been over-subscribed,” Bharti Airtel said in a notice to the exchanges after market hours Friday.
“The applications received in the rights issue are subject to verification and clearing of payments, as applicable, and finalisation of the basis of allotment,” the company added.
Shares of the company closed at Rs 328.2, up 0.84%, on the BSE Friday. The company’s rights issue was priced at Rs 220 per share. It had issued 1.14 billion shares, increasing its equity base 5.13 billion equity shares. The rights entitlement ratio was pegged at 19 shares for every 67 held.
The total funding will make the equity raise one of the largest ever, which company insiders said was a robust thumbs-up to the company and the outlook. Back in late-February, the Bharti Airtel board had cleared plans to raise a whopping Rs 32,000 crore through a Rs 25,000 crore rights issue at Rs 220 a share, and bond sales of Rs 7,000 crore.
The Bharti Airtel promoter group — including Bharti Telecom and Singtel — had said that they will subscribe to shares worth Rs 11,785.7 crore in the rights issue. The Singapore government’s investment arm, GIC, Is expected to have invested Rs 5,000 crore ($700 million) to pick up a stake of around 4.4% in Bharti Airtel by way of the stock entitlement of Bharti Telecom that it’s renouncing. Singtel on its part had said that it will invest Rs 3,750 crore ($525 million) in the issue.
ET had earlier reported that Bharti Telecom, the holding company of Bharti Airtel, was raising Rs 3,100 crore via bond sales to invest in the rights issue.
Bharti Telecom holds a 50.1% stake in Bharti Airtel. Singtel controls a 39.5% stake by directly holding shares in Airtel and also through its 48.9% interest in Bharti Telecom. The Mittal family owns the rest of Bharti Telecom.
Insiders estimate the total promoter holding in Bharti Airtel will drop around 4 percentage points to 63% from 67.14% after Bharti Telecom’s decision to renounce a portion of its rights subscription in favour of GIC. Singtel’s effective stake in Bharti Airtel will also decline to 35.2% from 39.5% with the renunciation to GIC and upon closure of the rights issue. The Mittal family though will maintain its stake at around 27% in Airtel.
The fundraising comes at a time when the industry is bleeding from a massive disruption caused by the entry of Reliance Jio over two years ago. Leading telcos will require a stream of funding to keep competing in the market and especially with Jio which has had a 4G ready network since the beginning of its operations.
Vodafone Idea, which reported losses of a shade under Rs 5,000 crore in January-March quarter with net debt at Rs 1.18 lakh crore at the end of March, has also raised Rs 25,000 crore recently via a rights issue, of which nearly Rs 19,000 crore will be used to repay debt, including spectrum dues, while the rest would be for general corporate expenses.
Source: Economic Times