Bharti Airtel's long-term debt loses 'AAA' rating

CRISIL cuts rating on bleak prospects for better gearing

CRISIL has cut the rating for Bharti Airtel Ltd’s long-term debt from “AAA” to “AA” on least prospects about significant improvement in gearing by March 31, 2013.

This was despite an equity infusion through an initial public offer (IPO) in its subsidiary, Bharti Infratel Ltd.

Rating agency in a statement said potential cash outflows towards one-time spectrum fees and licence renewal fees may result in capital structure taking longer to improve than previous expectations.

Its adjusted gearing remained high at around 1.4 times as on September 30, 2012, primarily due to continuing high value of the Indian rupee against US dollar.

Notwithstanding this, the operating performance in India is expected to improve on its strong market position, healthy operating efficiencies, and expectation of reduced competition. 

In Africa, Bharti Airtel is expected to gradually improve its operating efficiency driven by steady improvement in the utilisation of network.
 
Bharti Airtel will remain exposed to foreign currency risks, as the majority of its debt is in US dollars, while a substantial portion of its cash inflows are in Indian rupees.

Adverse foreign exchange rates have significantly slowed down the pace of improvement in Bharti Airtel’s gearing over the past year, CRISIL added.

The rating on the company’s short-term debt and bank facilities has been reaffirmed at ‘CRISIL A1+’.