Airtel considering offshore bond issue to raise up to 1 Bn

Bharti Airtel is considering issuing offshore bonds to raise up to USD 1 billion, approximately Rs 8,200 crore, with the aim of refinancing its expensive debts, strengthening its financial position, and covering a portion of its 5G investment requirements.

According to a leading media house, India’s second-largest telecommunications company is in talks with major foreign banks, such as Barclays, Standard Chartered Bank, and Citi, to explore the possibility of issuing US dollar bonds in international markets over one or more stages during this fiscal year.

A banker who is aware of the situation stated, that Airtel is in initial discussions with banks to issue dollar bonds worth up to USD 1 billion. He noted that it will take some time to obtain all the necessary regulatory approvals, as the talks are still in the framework stage. While the complete details of the fundraising plan have not been finalised, according to a media report.

While citing sources, the media report mentioned that offshore bonds are likely to mature in three to five years.

During the quarter ended March, Bharti Airtel’s consolidated net debt increased by 1.6 per cent to Rs 2.13 lakh crore, primarily due to an increase in lease liabilities. Gopal Vittal, the managing director, stated in the telco’s fourth-quarter earnings call that Airtel aims to reduce its debt to more comfortable levels, which would provide more flexibility for sustaining growth. This offshore fundraising plan through bonds comes at a time when Airtel’s annual capital expenditure for 5G rollout and rural expansion is expected to remain high at around Rs 28,500 crore in the current fiscal year, similar to the levels incurred in FY23.

Airtel has been rapidly expanding its 5G network and plans to launch services in all urban areas by September, with a nationwide rollout expected by December 2023.

As there is speculation that the monetary tightening in the US may soon end, some Indian companies, including the State Bank of India and Rural Electrification Corp, have recently tapped into the international debt capital markets. In late April, SBI raised USD 750 million through five-year bonds, attracting considerable investor demand with an interest rate considered aggressive relative to comparable US bond yields.

According to a foreign bank executive, there has been a recent shift of interest from loans to the bond market. The executive explained that due to the current spreads and the belief that US interest rates will not experience significant increases, bond issuance is seen as a more effective method for diversifying fundraising. As a result, the executive predicted that there may soon be a rise in issuances related to refinancing. BW Businessworld