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Airtel’s consolidated net debt was  ₹1.16 trillion as of June end. (Photo: Priyanka Parashar/Mint)
Airtel’s consolidated net debt was 1.16 trillion as of June end. (Photo: Priyanka Parashar/Mint)

Airtel hires i-banks to help raise up to $1 bn

  • Telco to use funds to reduce its consolidated net debt of 1.16 tn
  • BHARTI Airtel’s undersea cable unit Network i2i Ltd will be the official borrower

New Delhi: India’s second largest operator by revenue Bharti Airtel has appointed seven joint bookrunners and joint lead managers to kick start the process of a potential fund raising exercise through dollar denominated perpetual bonds, the company said in an exchange filing on Tuesday.

BofA Merrill Lynch, Barclays, BNP Paribas, Citigroup, HSBC, J.P. Morgan and Standard Chartered Bank will conduct a series of fixed income investor meetings/calls across Asia, Europe and the US commencing 2 October for this purpose.

Airtel’s wholly-owned subsidiary Networki2i will be the official borrower and is expected to issue the bonds, the company said, without divulging how much it plans to raise and the use of such proceeds.

The operator is likely to raise $750 million to $1 billion and will use it to reduce debt, a person aware of the development said requesting anonymity. Airtel’s consolidated net debt was 1.16 trillion as of June end.

The exercise to explore a fund raise comes at a time when the company is battling intense competition from rival Reliance Jio that entered the sector in September 2016.

Jio’s strategy to garner subscribers through cheap data tariffs has made it imperative for rivals to pump in funds in the cash-guzzling telecom sector.

To be sure, in March, Bharti Airtel’s promoters and Singapore’s sovereign wealth fund GIC had said they will together invest 16,785 crore as part of a rights issue approved by the operator’s board in February as it aims to strengthen its balance sheet and continue investment in networks in a hyper-competitive telecom market.

This had come just a week after the company’s board in February approved a rights issue of 25000 crore as well as raising 7000 crore through foreign currency perpetual bond issue, taking the total capital raise to 32000 crore.

Raising more funds for India business is crucial for Airtel as its profit has fallen every quarter since the entry of Reliance Jio. In fact, in the June quarter, Airtel posted its first quarterly loss in 14 years at 2,866 crore as finance costs rose and it incurred a one-time loss of 1,445 crore. It had recorded a net profit of 97 crore in the June quarter a year earlier.

Airtel’s revenue from India wireless business was 10,724 crore for the June quarter. In comparison, Reliance Jio generated 11,679 crore in operating revenue in the June quarter, beating Airtel on this metric.

The launch of low-cost tariff plans by Reliance Jio, a unit of Reliance Industries Ltd, forced rivals to drop their rates, hurting profit margins. Smaller companies were forced to either shut shop or get acquired, leaving just Airtel, Jio and the merged entity of Vodafone and Idea to compete in the Indian market.

Operators, including Airtel, also need funds to buy airwaves for the launch of 5G services. The department of telecommunications plans to hold the auction in January.

Airtel is also toying with the idea of completely divesting its stake in the proposed merged entity of Indus Towers and Bharti Infratel by selling stake to PE funds, Mint had reported on Monday.

The company’s Africa arm -- Airtel Africa -- had in June raised $750 million through an initial public offering (IPO). Prior to that, six investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group International, in October invested $1.25 billion through a primary equity issuance in Airtel Africa. Sunil Kant Munjal of the Hero group was also part of this consortium. In January, Qatar Investment Authority, invested $200 million in the Africa arm.

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