Bharti Telecom sells 2.75% stake in Airtel for Rs 8,433 cr in secondary market; more of debt relief exercise, feel analysts

Promoter firm Bharti Telecom has sold 2.75 percent stake in Airtel to institutional investors in the secondary market, raising over Rs 8,433 crore, the company said on Tuesday. The sale proceeds will be fully utilised to repay debt at Bharti Telecom and will make the promoter holding company a ‘debt-free company’, it said. Bharti Group and Singtel will continue to hold a majority stake in Bharti Airtel at 56.23 percent after the transaction, it added. Last week, Bharti Telecom raised about Rs 3,500 crore via commercial paper.

Bharti Telecom raises Rs 8,433 Cr via stake sale of 2.75% in Bharti Airtel; to use proceeds of Airtel stake sale to clear debt pic.twitter.com/iONVVffKlS

— CNBC-TV18 (@CNBCTV18Live) May 26, 2020

Announcing the closure of secondary block placement of Airtel shares, Bharti Telecom said that the issue over-subscribed multiple times with a healthy mix of all categories of investors, long only and hedge fund investors across geographies in India, Asia, Europe and the US. “Bharti Telecom Limited, the promoter company of Bharti Airtel Limited have today sold 2.75 percent stake in Bharti Airtel to institutional investors through an accelerated book-building process in the secondary market,” it said. Bharti Telecom has raised over Rs 8,433 crores (or about $1.15 billion) through the accelerated book-build offering of equity shares of Bharti Airtel, it added. The stake sale was anchored by several existing and new shareholders and several marquee global mutual fund complexes, sovereign wealth funds, multi-strategy funds and domestic institutional investors in sizable quantities, the company said. With Bharti Telecom Limited becoming a zero debt company Bharti Airtel’s credit profile will also be augmented as it will stand to benefit from deleveraging on a consolidated basis, including any debt of promoter holding company. “Bharti Group and Singtel, as Bharti Airtel’s largest shareholders remain committed to the business and the long term prospects of Bharti Airtel. In the last few years the promoters have invested over Rs 21,000 crores (over $3 billion) in Bharti Airtel and stay fully committed to investing further in the business as may be required,” the statement said. A deleveraging exercise, says Credit Suisse The secondary equity sale by promoter company Bharti Telecom Ltd (BTL) in Airtel is more of a deleveraging exercise and the sector fundamental remains attractive, Credit Suisse has said in a latest note. Bharti Telecom is raising $1 billion (almost Rs 7,600 crore) by selling shares in telecom firm Bharti Airtel through a block deal on Tuesday at Rs 558 apiece, to become debt-free. It has sold has 2.75 percent stake in Airtel to institutional investors in the secondary market, raising over Rs 8,433 crore, the company said in a statement. “We see this stake sale by BTL a positive as it will make the promoter entity debt-free, in turn improving the flexibility for any support to Airtel in future. The promoter group will continue to hold 56.3 percent in Airtel,” IIFL Securities said, according to a PTI report. “Secondary equity sale by Bharti Telecom is more of a deleveraging exercise, in our view; sector fundamental remains attractive,” Credit Suisse said. Credit Suisse added that it expects Bharti Airtel to benefit from ongoing market repair in the sector. Another report by Jefferies said that while a stake sale by promoters is usually construed negatively by investors, in this case the stake sale is mainly to de-leverage Bharti Telecom and, hence, not a negative in its view. --With PTI inputs