S&P said Bharti Airtel's Indian mobile segment is likely to continue growing at a healthy rate, but there is the absence of across-the-board tariff hikes and is taking place at a slower pace than in fiscal 2021.
International rating agency S&P on Thursday maintained Bharti Airtel's credit rating of "BBB-", and upgraded outlook to stable from negative, indicating the company's improved financial status and ability to pay back debt. S&P said Bharti Airtel's Indian mobile segment is likely to continue growing at a healthy rate, but there is the absence of across-the-board tariff hikes and is taking place at a slower pace than in fiscal 2021. "S&P Global Ratings revised the outlook on Bharti Airtel to stable from negative. At the same time, we affirmed our 'BBB-' long-term issuer credit rating on Bharti Airtel and the 'BBB-' issue rating on the company's senior unsecured notes. “We also affirmed the 'BB' issue rating on the subordinated perpetual securities (PERPS) it guarantees," S&P said in the credit rating report.
S&P BBB implies an entity has adequate capacity to meet financial commitments, but more subject to adverse economic conditions. The net debt of Bharti Airtel at the end of the April-June 2021 quarter was over ₹1.59 lakh crore. S&P said the momentum in Bharti Airtel's Indian mobile average revenue per use (ARPU) growth may pick up after slowing in recent quarters. "Other than customers upgrading to higher-tariff plans over time amid growing data demand, Bharti Airtel has recently ceased its lowest-priced prepaid, postpaid, and corporate tariff plans.
These factors should translate to higher ARPU," the report said. The agency said India's 5G roadmap and Bharti Airtel's corresponding 5G spectrum investments remain uncertain. The board of the company last month approved a proposal to raise up to ₹21,000 crore through the rights issue. Bharti Airtel Chairman Sunil Mittal had recently said the company's ₹21,000 crore fundraising will enable the firm to shift from "business as usual" to a higher gear to tap opportunities, improve leverage position, and chase profitable growth by speeding investments in 5G, fibre and data centres. "We believe the rights issue aims to preemptively build financial capacity for Bharti Airtel ahead of the upcoming 5G investments, given the absence of other immediate funding needs.
While the rights issue has yet to conclude, it is highly likely to materialise, in our assessment," S&P said. Bharti Airtel's has announced that the promoter and promoter group will collectively subscribe to the full extent of their aggregate rights entitlement, and to any unsubscribed shares. "The company also has a good track record of capital raising. Bharti Airtel had investor support even during periods of weakness, such as during fiscal 2020 when the company raised equity to repair its balance sheet after making provisions for a lawsuit over adjusted gross revenue (AGR) dues to the regulator. Thus, we believe that a high level of support is likely given that Bharti Airtel's results have been improving," the report said.