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Franklin, ICICI Pru, SBI & HDFC MFs Invest In Airtel Rights Issue

Four bigticket fund houses, including Franklin Templeton MF, ICICI Prudential MF, SBI MF and HDFC MF, are among those that have bid for Bharti Airtel’s about Rs 25,000-crore rights issue, bankers involved in the process said, which the telecom operator will use to bolster its balance sheet to fight rivals Reliance Jio and Vodafone Idea.

“The issue was subscribed 1.07 times,” said a banker familiar with the issue details.

Late Friday, the mobile phone operator had said, “Based on preliminary information received, the rights issue has been over-subscribed.” The country’s No 2 telecom carrier did not, however, provide specific details. The rights issue was priced at Rs 220 apiece.

The company issued 1.14 billion shares, increasing its equity base to 5.13 billion shares. The rights entitlement ratio was 19 shares for every 67 held. Shares of the company closed 0.84 percent higher at Rs 328.2 on the BSE Friday. Airtel has also raised another $1 billion (Rs 7,000 crore) through the sale of perpetual bonds to fund its 4G network expansion.

The rights and bonds issues were the latest by Bharti Airtel to shore up the balance sheet and free up cash to invest in 4G networks amid continuing competition since Reliance Jio’s entry in September 2016. “…the (latest) capital raise provides the company with adequate financial muscle amidst the current intense competitive environment in Indian mobile market,” UBS said in a recent report.

Rajiv Sharma, co-head of research at SBICap Securities, said, “the strong response to the rights issue will also give Airtel the financial capability to participate meaningfully in the upcoming 5G auction as and when it happens”. Airtel’s rights issue outcome must not be seen in isolation as it will be followed by an IPO of its Africa unit, the proceeds of which will further reduce leverage, Sharma said. The Singapore government’s investment arm GIC is estimated to have invested Rs 5,000 crore for 4.4 percent of Bharti Airtel by picking up a part of the rights entitled to Bharti Telecom, one of the promoter companies, the other being SingTel. The Bharti Airtel promoter group, comprising Bharti Telecom and Singtel, had said that they would subscribe to shares worth Rs 11,785.7 crore in the rights issue. Singtel had said that it would invest Rs 3,750 crore.

Airtel, whose India mobile business was forced into the red, has already raised over Rs 12,000 crore by selling stakes in tower unit Bharti Infratel. It is expected to sell more stake in an entity to be formed after the merger of Bharti Infratel and Indus Towers.

The initial share sale in its Africa unit is expected to fetch another $1.25 billion, which will further cut debt, which stood at Rs 1.06 lakh crore at the end of December. The company hasn’t provided updated figures due to the rights issue.

“On our calculations, Rs 32,000 crore will help reduce Airtel’s net debt to EBITDA to 3.3x (vs 4.8x using Q3FY19 reported financials), which could potentially go down to around 2.2x assuming the company is able to raise further capital from its African IPO and Bharti Infratel stake sale as previously announced,” UBS said. The perpetual bonds of Rs 7,000 crore will be denominated in foreign currency and will allow full accounting for equity credit, it added. The fund raise comes at a time when analysts believe the worst is behind for India’s older players Airtel and Vodafone Idea, both of whom saw their respective average revenue per user (ARPU) rise in the January-March quarter. Having held prices steady for several quarters now, experts expect rates to rise – albeit gradually – later this fiscal year ending March 31, 2020.

Vodafone Idea also recently raised Rs 25,000 crore via rights issue. Lead managers to the issue were Axis Capital , J.P. Morgan, Goldman Sachs (India) , HSBC Securities and ICICI Securities Ltd.―Business Telegraph

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