Bharti Airtel gains 3% as Africa arm appoints eight global banks for IPO

The stock was up 3% to Rs 338 on BSE after the telecom operator said its African unit has appointed global investment banks for a proposed IPO on an international stock exchange.

Shares of Bharti Airtel are up 3% to Rs 338 on BSE in intra-day trade after the telecom operator said its African unit has appointed global investment banks for a proposed initial public offering (IPO) on an international stock exchange.

“The banks appointed are J.P. Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank Group,” Bharti Airtel said in a press release.

This follows the recent subscription of shares in Airtel Africa by six leading global investors comprising of Warburg Pincus, Temasek, Singtel, SoftBank Group International and others for an aggregate consideration of USD 1.25 billion, it added.

Bharti Airtel has recovered 22% from its 52-week low of Rs 277 touched on October 22, 2018, in intra-day trade. In comparison, the S&P BSE Sensex was up 2.6% during the same period. The stock of telecom operator had hit a 52-week high of Rs 547 on December 27, last year.

Earlier, this month, Hong Kong-based Moody's Investors Service (Moody's) has placed on review for possible downgrade of the Baa3 issuer.

The review for downgrade is primarily driven by the rating agency’s expectation that Bharti's cash flow generation will remain weak and leverage elevated. The review also reflects the company's low levels of profitability, particularly from its core Indian mobile operations, negative free cash flow and higher debt levels to fund capital spending.

The ratings could be downgraded if the company fails to use proceeds received from its recent pre-IPO of its African business or its proposed capital-raising activities for debt reduction. Moreover, any further deterioration in its operating performance, particularly in the Indian mobile segment, such that earnings and cash flows or revenue market share contracts from current levels, would also lead to a downgrade, Moody’s said in a release.

Motilal Oswal Securities maintains positive stance on Bharti Airtel with a valuation of 10x each ascribed to the India/Africa business FY20E EBITDA and a target price of Rs 390.

“The Africa business has turned into a strong value-generating asset, thereby garnering healthy valuations. This, in turn, has improved its India valuation to around 8x despite its depressed EBITDA. Given Bharti’s strong network and product capabilities, we believe that the industry revival could drive a strong earnings recovery for the company,” the brokerage firm said in sector update.

At 10:23 am, Bharti Airtel was up 2.3% at Rs 336, the top gainer among the S&P BSE Sensex stocks. In comparison, the benchmark index was up 0.03% at 34,992 points. A combined 2.27 million equity shares changed hands on the counter on the BSE and NSE so far.