Airtel dials up ₹ 21,000 ­croreS rights issues

Bharti Airtel on Sunday said that its board of directors has approved equity capital raising of up to ₹ 21,000 crores through a rights issue.

“The board approved the issuance of equity shares of the face value of ₹5 Each of the companies on a rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of up to ₹21,000 crores further capital,” the company said in a stock exchange filing.

However, the company is yet to share details on the purpose of the proposed equity capital raise. According to sources, the company may use this fund for Capex and investment for 5G technology with collaborations with various partners.

This is one of the biggest fundraisings of the company after its qualified institutional placement (QIP) and foreign currency convertible bond issuance last year. In January last year, the telecom major had raised $2 billion via a QIP issue, mainly to pay its dues to the Department of Telecommunications as directed by the Supreme Court towards
adjusted gross revenue (AGR).

5G auction:
According to some analysts and market trackers, apart from the investment to develop 5G technology, the company may utilize the proposed capital mop­up for the upcoming 5G spectrum auctions, expected at yearend. Theoretically, it can utilize some funds for paying AGR dues to the government, but it is unlikely. The company has AGR dues of ₹43,000 crores, out of which it has already paid ₹18,004 crores by March 31. However, some also opined that the announcement is not clear yet on the purpose/utilization of the capital, and it is a bit of a dampener for such a high
capex-­intensive sector.

“This is the third round of fundraising in less than three years after ₹42,000 crores raised in the fiscal year 2020. It’s a
bit of a dampener after rising leverage in the last three years coming from high Capex, non­core investment, and AGR liabilities. Plus no clarity on purpose/utilization of fundraising,” Aliasgar Shakir ­ Telecom Analyst, Motilal Oswal Financial Services, told BusinessLine, adding that there is no update on any strategic investment too.

Net debt:
But, another telecom industry observer said the proposed capital mop­up, which is expected to happen over 36 months, is likely to strengthen the balance sheet of Airtel and enable the telecom company to raise more debt resources in the
years to come. The company, with net debt of ₹1.6 lakh crore, would require such fundraising through different routes, said some analysts. For improving its balance sheet and for return on investment too, the company has been vocal about increasing the average revenue per user (ARPU) to ₹200­300 in the coming months. The company has been targeting this ARPU range for a long since the launch of Reliance Jio in 2016.

As of the first quarter ended June, Airtel’s ARPU was ₹146, whereas Reliance Jio’s was ₹138.4 and Vodafone Idea ₹104. The just­announced rights issue involves fully paid­up equity share of ₹535 each (including a premium of ₹530 per equity share). Twenty ­five percent of this has to be paid on application and the balance in two more additional calls as may be decided by the Board/ Committee of the Board from time to time, based on the company’s requirements within an overall time ­horizon of 36 months. For the QIP issue, the board had fixed the floor price as ₹452.09 a share. Shares of Airtel closed at ₹593.95apiece on the BSE on Friday, up 1.21 percent from the previous close.

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