Home / Companies / News /  Airtel raises $3 billion to repay government dues

NEW DELHI : Bharti Airtel Ltd has raised $3 billion through a qualified institutional placement (QIP) and an overseas bond to repay government dues.

The telco raised $2 billion through a QIP at 445 a share, it said in a release on Wednesday. An additional $1 billion was raised through an issue of foreign currency convertible bonds (FCCB). The bonds were issued at a coupon of 1.5% per annum and will mature in 2025. FCCBs are debt instruments denominated in a foreign currency, which can be converted into shares.

Bharti Airtel’s board had approved an initial conversion price of 534 per equity share for the bond issue.

With the completion of the latest fund-raising exercise, Airtel has raised a total of $11.1 billion in equity capital over the past five years.

The operator, hit by an apex court verdict mandating it to pay dues of 35,586 crore to the department of telecommunications (DoT) by 24 January, will use a chunk of the proceeds from the QIP to meet this liability.

“The company proposes to utilize the net proceeds for any payment that may be required to be made arising out of the judgment of the Supreme Court of India delivered on 24 October in relation to a long outstanding industry-wide case in respect of the definition of adjusted gross revenue (AGR)," Airtel said on 8 January. Post the QIP issue, Airtel’s promoter group holding will fall from 62.70% to 58.98%.

“The transaction is the largest dual tranche equity and FCCB offering ever in Asia-Pacific, the largest QIP by a private sector issuer ever in India and the largest FCCB offering from an India issuer in the last 12 years," it added.

The Supreme Court had upheld the government’s definition of AGR, which includes revenue from non-core telecom operations such as rent, dividend and interest income. Operators have to pay 8% of their AGR as licence fee.

The fundraise is also significant as Airtel needs to build a war chest to survive in the competitive domestic telecom market, which witnessed disruptions after the entry of Reliance Jio Infocomm Ltd. In September 2016, Jio’s entry brought down data prices to rock bottom, prompting half-a-dozen telcos to either shut shop or be acquired. The domestic telecom market is now largely a three-way play between Airtel, Vodafone Idea and Jio.

Airtel will also require resources as DoT prepares to hold the first spectrum auction for 5G airwaves by April. DoT plans to put 8,300 megahertz of spectrum at a reserve price of 5.23 trillion on the block. About 6,050MHz will be allocated to 5G services.

Last week, Airtel said it also plans to use the QIP proceeds to increase its long-term resources and strengthen its balance sheet, for servicing and/or repayment of short-term and long-term debts, capital expenditure, and working capital requirements.

The proceeds of the FCCB issue will be used for capital expenditure, repayment of existing debt, and/or any other use as permitted under applicable laws.

On 4 December, the company’s board had approved the proposal to raise up to $3 billion ( 21,500 crore) through a mix of equity and debt.

Airtel posted a 23,045 crore loss in the September quarter, its highest loss in 14 years, compared to a profit of 118 crore a year ago, as it set aside 34,260 crore to pay the AGR dues.

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