New Airtel to Lower Its Stake in Bharti Infratel to Raise Rs 15,000 Crore

Sunil Bharti Mittal led telecom operator, Bharti Airtel will be rallying to the task of raising more funds to better compete in the industry. To do that, the operator will be selling a 32% stake in its tower subsidiary, Infratel, which would fetch Rs 15,500 crore to Airtel. The operator’s 4G network would help a lot through this infusion and the capital would also assist it in better competing with the rival telco, Reliance Jio Infocomm. In a related development, Bharti Airtel has also appointed Badal Bagri as its new CFO who would assume his position starting March 1st next year. ET Telecom reported that Bagri would replace Nilajan Roy as the CFO who has left the company to join tech giant Infosys.

32% Stake in Infratel to Fetch Airtel Upwards of Rs 15,000 Crore

In a regulatory filing on Bombay Stock Exchange (BSE) on Thursday, Bharti Airtel remarked that it has “approved the sale/transfer of up to 591.87 million equity shares (32%) of Bharti Infratel, to its wholly-owned subsidiary, Nettle Infrastructure Investments Ltd, to explore a potential monetisation of its (Bharti) Infratel stake, subject to the approval of shareholders.”

It is worth noting that currently, Bharti Airtel owns 50.33% of Infratel, whereas its position after selling the stake in the company will drop down to 18.33%. The company who will be buying the stake, Nettle Infra Investments’ will increase its stake to 35.18% down from 3.18%. At closing on Thursday, Infratel’s stock stood at Rs 261. Further, as we mentioned above, this stake selling in Infratel would bring Rs 15,450 crore worth of capital to Bharti Airtel, which it would use as a war chest.

Another significant aspect of this deal is the amalgamation of Indus Towers into Bharti Airtel. According to the people aware of the matter, the stake sale in Infratel would be like a post-closure of the Indus-Bharti Infratel merger. After the merger, there are going to be further changes in the ownership structure of the newly merged tower entity. The company will then be jointly owned by Vodafone Idea.

Competition in 4G Market Main Reason for Fund Raising

Rohan Dhamija, head of India & Middle East at telecom and media consulting firm Analysys Mason said about this new move by Airtel, “Given the big strides that Jio has made in cornering revenue market share and customers from the incumbents in the September quarter, Airtel is clearly trying to defend turf by building a war chest to fight the Mukesh Ambani-led telco.”

He further added, “The towers business is a relatively stable one, which is why the planned Infratel stake monetisation can generate the requisite cash for Airtel to deploy in its struggling core telecom business in India.”

It won’t be wrong to say that a lot of industry experts saw this coming since over the last 21 odd months, Bharti Airtel has been diluting its stake in the tower firm to raise more and more capital. It is evident that the second-ranking telecom operator lost its top position to the newly merged Vodafone Idea and it also expects a threat from the Mukesh Ambani led telco Reliance Jio. As such, the company would like to pare its debt while keeping a full arsenal to better compete in the 4G market.

More Options for Fund Raising Still Being Explored

In another exchange filing, the Airtel had said that its board had formed and authorised, “a special committee of directors to comprehensively explore/evaluate various fundraising options to strengthen the company’s capital structure and balance sheet”.

Back in November, another report had surfaced informing about the same that Bharti Airtel was plotting to raise around Rs 12,000 – Rs 15,000 crore to raise funds to sustain in the heavily competitive market. It was reported that Airtel was exploring options of a rights issue to existing shareholders or a private placement to institutional investors and promoters.

In another related development, the Africa arm of Airtel has recently raised $1.25 billion, or about Rs 9,200 crore in November via a placement of shares to six global investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group. Also, Airtel Africa will likely go public in the country next year around May-June, where it expects to raise $1.25-1.5 billion more.