Crisil removes Bharti Airtel's debt programmes from watch list

Credit ratings agency Crisil today removed Bharti Airtel's four long-term banking and debt programmes from its watch list, partly on expectations of equity infusion of $2 billion within a year.

Crisil put these funding programmes on its "Ratings Watch with Negative Implications" in February, after Bharti Airtel announced plans to acquire Zain Africa at an enterprise value of $10.7 billion.

Crisil has now reaffirmed AAA category status for the company, although it has keep the outlook as "Negative". AAA is the highest rating that Crisil assigns to corporates or banking/debt programmes. The rating further has various "outlooks" attached to it.

Crisil said, "The ratings reaffirmation reflects Crisil's belief that strong cash flow generation from Bharti Airtel's Indian business will aid the company's organic deleveraging (reduction of debt by using internal cash flows)."

It said Bharti's plans to infuse about $2 billion as equity will complement organic deleveraging and lead to faster-than-expected improvement in capital structure.

"The reaffirmation also reflects the high growth potential of the African markets, increased diversity in Bharti Airtel's revenue profile and the benefits that the company is likely to reap from reducing the operating expenses and capital expenditure of Zain Africa," Crisil said.

Crisil said, however, the ratings could be downgraded if the profitability of the combined business is not in line with its expectations or if the infusion of equity is delayed beyond one year.

On the ongoing bidding for 3G mobile services spectrum (radio waves that enable two-way voice/data communication), in which the company is participating, Crisil said it is unlikely to significantly affect Bharti Airtel's risk profile.

Four of Bharti's banking and debt programmes were put on the "AAA/Negative (Ratings Watch with Negative implications)", from which they have now been removed. These include a Rs 1,418 crore letter of credit/bank guarantee; a Rs 385 crore cash credit/overdraft; Rs 200 crore Non-Convertible Debentures (NCDs) and Rs 72.50 crore NCDs.

Bharti Airtel today reported a decline of 8 per cent in its consolidated net income at Rs 2,055 crore for the fourth quarter ended March 31, 2010, over Q4 in FY09. It is the company's first decline in net profit in three years.

Total Q4 revenues of the company rose to Rs 10,056 crore, up 2 per cent from Rs 9,825 crore in the corresponding period of the previous fiscal. For the entire 2009-10 fiscal, Bharti Airtel's consolidated revenue was up 7 per cent at Rs 39,620 crore over FY09 and its net profit was up 7 per cent at Rs 9,103 crore.