January 23, 2020
Rating Agency ICRA has removed Bharti Airtel Limited (BAL)’s rating watch with “negative implications”, saying its outlook is now stable after successful completion of a fundraising exercise worth $3 billion (over Rs 21,600 crore) via equity and equity convertible instruments. The agency, however, indicated the company’s mounting gross debt of Rs 1.36 lakh crore remained a concern. The credit ratings agency had downgraded the company’s long-term ratings from ‘AA’ to ‘AA-‘ in November 2019.
Bharti Airtel’s fundraising plan includes equity infusion via Qualified Institutional Placement (QIP) issuance of $2 billion (Rs 14,400 crore) along with foreign currency convertible bonds (FCCB) of $1 billion (Rs 7,200 crore).
“The reaffirmation of the rating factors in BAL’s established market position in the telecom industry in India, its integrated telecommunications operations, its diversified presence across geographies and business verticals, and economies of scale with presence in large telecom markets like India and Africa,” ICRA said in a statement.
ICRA also says the company has 35.2 per cent effective ownership (prior to QIP) by Singapore Telecommunications Limited, which is rated A1 (negative) by Moody’s Investor Services. However, the rating agency said it also took into account the steps taken by the company over the last two years to consolidate its market position and its spectrum holding, through the acquisition of data-centric spectrum.
“BAL has undertaken sizeable deleveraging initiatives in the current fiscal including, rights issue of around Rs 25,000 crore, and IPO of $670 million of Airtel Africa, besides measures to improve its debt profile through the issuance of perpetual bonds of $750 million. These steps along with recent QIP and FCCB placement demonstrate its strong financial flexibility,” the agency said.
On the issue related to the Supreme Court order on pending AGR (Adjusted Gross Revenue) dues worth Rs 93,000 crore against major telcos, including Airtel, the rating agency said that apart from the AGR related payments, the ratings were also constrained by the elevated debt levels of the company, which stood at Rs 136,579 crore.
Of the total AGR dues worth Rs 93,000 crore, Airtel has to pay Rs 21,682 crore while Vodafone Idea’s dues stand at Rs 28,308 crore. But ICRA expects the telco to comfortably fund the AGR liability given its strong financial flexibility demonstrated through multiple fund-raising initiatives.
ICRA said the recent tariff hikes by Airtel will result in improvement in its mobile performance. Airtel provides a global system for mobile communications (GSM) mobile services in all 22 telecommunication circles across India, while the home services group provides broadband and wireline services.