Bharti Airtel, India’s largest mobile phone company, is believed to be looking to sell a higher stake in Bharti Telemedia, its DTH arm, to raise funds for building a war chest to fight Reliance Jio Infocomm, people familiar with the matter said.
A precursor to such a sale was a board approval to transfer 19% additional stake in Bharti Telemedia to wholly-owned unit, Nettle Infrastructure Investments. This transfer will be in addition to a 25% block already transferred in January 2018, thus taking the block being transferred to 44%.
A part of the company’s “aforesaid stake (19% in Bharti Telemedia) shall be utilised for completion of stake sale of Telemedia to the Warburg Pincus Group,” Bharti Airtel said in a regulatory filing to the Bombay Stock Exchange Tuesday.
Part of the balance stake, people say, are for further stake sale to raise funds, though Airtel would continue to own a majority stake in its DTH arm. This move comes a day after the Airtel board approved a plan to raise about Rs 16,500 crore through debt, including a fresh issue of $1 billion in overseas bonds, to help refinance loans and pay for spectrum. Bharti Airtel did not reply to ET’s queries on whether routing 44% of its Telemedia stake to Nettle now similarly sets the stage for bigger stake sales in its DTH arm. The telco’s shares closed 1.22% at Rs 425.90 on BSE on Tuesday.
Back in December last year, the Bharti group had announced plans to sell a fifth of its DTH arm to an affiliate of global private equity firm Warburg Pincus, for around Rs 2,258 crore ($350 million). As per transaction details then disclosed, Bharti Airtel would directly sell 15% of its DTH arm to Lion Meadow Investment — a Warburg Pincus entity — for Rs 1,623.76 crore, while the balance would be sold by a Bharti promoter entity, which owns 5% in company.
“This is a clear signal from Airtel to the markets that it’s open to selling stakes in valuable but non-core businesses to keep a war chest ready to combat Jio,” said Naveen Kulkarni, telecoms analyst at PhillipCapital.
Another sector analyst at a leading global brokerage, who did not wish to be named, said Airtel transferring as much as 44% of its Telemedia shares to Nettle Infra throws up possibilities of additional stake sales in the DTH arm to global private players at the right valuations.
Airtel’s move, he said, “mirrors what the Mittal-led telco did before selling a 10.3% stake in tower arm, Bharti Infratel,” to a global consortium, comprising KKR and Canada Pension Plan Investment Board (CPPIB).
A year ago, Airtel had transferred upto 400 million shares in Bharti Infratel to Nettle Infrastructure Investments in tranches ahead of subsequent dilutions in its listed tower arm, starting with the stake sale to the KKRCPPIB consortium.
Over the past one year, Airtel has been raising funds by progressively reducing its stake in its listed tower unit, Bharti Infratel, to cut debt and free up cash and gird up for competition with Jio, having taken a severe hit on revenue and profits in the past year or so. Airtel has raised nearly Rs 12,089 crore through multiple tiny stake dilutions in the tower arm. The company has recently said it may sell a much larger stake in Bharti Infratel, in which it owns some 53.51%.
In a separate development, Singapore Telecommunications (Singtel) has concluded its Rs 2,649 crore investment in Bharti Telecom, taking its total stake (including affiliates) in the holding company of Bharti Airtel to 48.90% from earlier 47.17%. Bharti Enterprises will continue to own 50.1% of Bharti Telecom.
Consequently, Singtel’s economic interest in Bharti Airtel too has risen by 0.9 percentage point to 39.5% while the Indian promoter’s share stands diluted proportionately to 27.08% from 27.93% previously.
Last month, Singtel had announced plans to raise its stake in Bharti Airtel by investing Rs 2,649 crore in the telco’s holding company, Bharti Telecom, through a preferential share issue, proceeds of which would be used to cut debt.
Source: Economic Times