India’s second-biggest wireless telephony major, Bharti Airtel, has begun marketing its $2-billion (Rs 14,350 crore) equity issuance to institutional investors on Wednesday to pay the AGR (adjusted gross revenues) dues to the central government within the January 23 deadline set by the Supreme Court. The company will also raise an additional $1 billion (Rs 7,155 crore) as convertible bonds due in 2025, accoring to the terms of the transaction.
The equity offering comes within months of Bharti Airtel raising Rs 25,000 crore ($3.5 billion) from shareholders through a rights issue, making the combined exercise of Rs 40,000 crore ($5.5 billion) the biggest ever equity raising by any Indian corporate within a financial year.
In May, Bharti Airtel had raised funds from its shareholders at Rs 220 a share through a rights issue. On Wednesday, the company’s stock closed at Rs 459 a share, giving more than 100 per cent returns since the rights issue.
With this latest sale, Bharti Airtel will cumulatively raise around Rs 1.35 trillion since April 2014 either by way of equity or debt. A little over half of the fresh funds have come through the equity route thanks to the company’s higher market capitalisation compared to industry peers. As on Wednesday, Bharti’s market cap was Rs 2.35 trillion, compared to Rs 18,700 crore of Vodafone Idea Ltd.
Key Performance Indicators
In all, Bharti Airtel has raised about Rs 65,000 crore through fresh share sale or equity issuances since April 2014. In the same period, the company made fresh borrowings worth around Rs 70,000 crore.
The numbers are based on changes in the company’s balance sheet since the financial year 2014-15 (FY15) and upto September 2019.
The company’s balance sheet also suggests that it made fresh borrowings worth around Rs 10,000 crore during the six months ending September 2019.
This makes Bharti Airtel one of the biggest fund raiser in the past five years, which has otherwise been a tepid period for capital mop-up by corporate India.
Bharti Airtel refused to comment on its fundraising plans on Wednesday. The company had taken shareholders' approval to raise $2 billion by way of equity at an extraordinary general meeting last week.
The fundraising — led by Citibank, Goldman, Kotak and Axis Capital as bankers – will see participation by foreign and domestic institutional investors, who are betting on Bharti Airtel’s future in spite of the massive Rs 35,500 crore AGR dues the company needs to pay before January 23. Vodafone Idea Ltd, too, is expected to pay Rs 53,000 crore worth of dues to the Indian government, according to the apex court judgment.
The promoters currently own a 62.7 per cent stake in the company, which fell by four percentage points in the rights issue after Bharti Telecom, one of the promoter entities, had renounced a part of its share in the rights subscription in favour of GIC of Singapore.
Analysts say frequently raising capital has allowed Bharti Airtel to fund new capex to keep pace with the deep pocketed Reliance Jio without straining its balance sheet, unlike its peers such as Vodafone Idea.
The fresh equity issue and the resulting rise in its equity base and networth also allowed Bharti Airtel to easily absorb the AGR liability and maintain key balance sheet ratios such as debt to equity and debt to ebitda (earnings before interest, tax, depreciation and amortisation) ratio within reasonable limits, raising investors’ confidence in the stock.
Bharti Airtel reported debt to equity ratio of around 1.8x at the end of September, against Vodafone Idea’s 4x. Analysts expect Bharti Airtel leverage ratio to improve to around 1.55x after the fundraising.