Crisil Assigns GVC-1 Rating To Bharti Airtel

Crisil had assigned this rating to the telecom operator in 2017 but it was withdrawn in May 2019. The current rating follows a strong demonstration of a strong and diversified board and good corporate governance practices, noted Crisil.

Last week, the government had asked Bharti Airtel, Vodafone Idea and other telecom companies to pay remaining AGR dues as per the Supreme Court order without further delay. It had written to all telcos asking them to pay balance dues “without delay” and submit detailed bifurcation of payments (explanation of self-assessed amounts), which it said are necessary for proper reconciliation of legitimate adjusted gross revenue (AGR) dues.

Bharti Airtel chairman Sunil Bharti Mittal met Telecom Secretary on Wednesday and asserted Airtel has paid its full dues of about Rs13,000 crore and additional Rs5,000 crore as well, according to reports.

“The effectiveness of the board is reflected in the fact that Airtel has been able to largely maintain its market share amidst intense competition in the Indian telecom industry over the past three years,” said the report.

Another feature of good corporate governance, noted by Crisil, at Airtel is the fact that it has been holding an Independent Directors only session, which is presided by a Lead Independent Director, before every board meeting for more than a decade. This in Crisil’s opinion gives independent directors a platform to identify areas where they need more clarity or information, and enables them to put this openly before the board or management. The independent directors also meet with statutory auditors without presence of the executive management.

According to the report, over the five fiscals through February 2020, the annualised return to Airtel’s shareholders stood at 7.97% as compared to Nifty index return of 4.7%. Furthermore, despite industry headwinds, the company has rewarded its equity holders with a cumulative dividend of Rs3,134 crore (excluding tax on dividends), over fiscals 2018 and 2019. Last month, Crisil reaffirmed its ratings on the long-term bank facilities and debt programmes of Bharti Airtel at ‘Crisil AA/Stable/ Crisil A1+’. The reaffirmation factored in expectation of sustenance of the credit risk profile over the medium term due to improving business and leverage metrics.

The telecom operator, despite their struggle with AGR dues, reported better operational numbers in the December quarter following successful tariff hikes. The benefits from these hikes are likely to have better visibility over the next two quarters.

The agency has however flagged concerns the operator’s employee base citing higher attrition rate in the previous fiscal. “However, Crisil believes that increased employee engagement and career planning initiatives being taken by the company should help moderate the employee attrition rate going forward.”

The operator had earlier made additional payment of Rs8,004 crore towards AGR dues, which was an addition to Rs10,000 crore it had paid on February 17, 2020 in compliance to the Supreme Court judgment, it said in a regulatory filing. The total payout by Bharti Airtel, however, is half of Rs35,586.01 crore liability estimated by the Department of Telecommunication.

―Livemint