AGR Impact: S&P Keeps Airtel Rating On Negative Watch

S&P Global on Thursday kept Bharti Airtel’s rating on watch negative, citing that Rs 34,300 crore AGR setback will decisively weaken the telecom major’s leverage.

As per the Supreme Court verdict, Bharti Airtel will have to pay the amount by January 22, subject to an audit and confirmation from the DoT.

Meanwhile, Bharti Airtel has hiked tariffs by 15-45 percent effective December 3, which should temper the impact of the court ruling.

“We expect the tariff hikes to increase the company’s reported revenue and EBITDA for its India mobile services business by 20-22 percent and 26-30 percent, respectively,” S&P said in a release.

S&P further added that Airtel’s plan to raise $2 billion in equity and $1 billion through a combination of foreign currency convertible bonds, redeemable nonconvertible debentures with warrants, or similar instruments could help it to fund the lawsuit payout.

“The company could also request DoT to provide relief or waiver from the penalty and related interest, or allow payment in instalments. A successful equity raising and additional relief from the DoT or the Supreme Court would be credit positive for Bharti Airtel and could accelerate a recovery in the company’s financial performance,” S&P said.

Earlier during the day, shares of Bharti Airtel closed 2.96 percent down at 447.20. The benchmark BSE Sensex closed nearly 71 points lower at 40,780.―India Finance News