Bharti Airtel corrects after ICRA downgrade

Bharti Airtel fell 3.72% at Rs 434.5 after credit rating agency ICRA downgraded company's ratings.

Ratings agency ICRA downgraded Bharti Airtel's long-term rating from "AA" to "AA-" citing the recognition of higher than anticipated provision pertaining to the Supreme Court judgement on dues payable towards license fees on adjusted gross revenues (AGR) as well as spectrum usage charge in the latest quarterly results.

It said the ratings continue to remain under watch with negative implications. Separately, it also reaffirmed Bharti Airtel's commercial paper at "A1+".

"Although the company has not tied up funds for the same, this liability, if materialises is expected to be funded through a bridge loan, which would result in deterioration in debt coverage metrics in near term," ICRA said in a release.

On 24 October 2019, the Supreme Court of India (SC) delivered a judgement in relation to a long outstanding industry-wide case upholding the view considered by Department of Telecommunications (DoT) in respect of the definition of Adjusted Gross Revenue (AGR) (Court Judgement). This Court Judgement has significant financial implications on the company. SC has allowed a period of three months to the affected parties to pay amounts due to DoT.

The company provided for an additional amount aggregating Rs 28,450 crore as a charge for the quarter (comprising of principal of Rs 6,164 crore, interest of Rs 12,219 crore, penalty of Rs 3,760 crore, and interest on penalty of Rs 6,307 crore) with respect to the license fees estimated based on the court judgement and spectrum usage charges (SUC) as estimated based on the definition of AGR.

Shares of Bharti Airtel surged 7.20% to end at Rs 451.30 on Monday (25 November 2019) after a foreign brokerage retained its buy rating on the stock while raising its target price to Rs 515 per share from Rs 415 per share.

Meanwhile, the NSE Nifty 50 index was down 35.7 points at 12,038.05.

Bharti Airtel is a leading global telecommunications company with operations in 18 countries across Asia and Africa.

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