Telecom operator Bharti Airtel on Thursday said its Board has approved fundraising plans of up to Rs 32,000 crore through a mix of rights issue and bond, a move that will arm the company with firepower to take on market competition intensified by Reliance Jio and help it cut debt. The mega fund-raising plans outlined by Bharti Airtel comes just days after Vodafone and Aditya Birla Group said they would infuse over Rs 18,000 crore into India's largest telecom operator Vodafone Idea Ltd through a rights issue. In a statement, Bharti Airtel said the Board of Directors have "approved the fundraising of up to Rs 32,000 crore through rights issuance of up to Rs 25,000 crore and Perpetual Bond with equity credit up to Rs 7,000 crore".
Perpetual bond of up to USD 1 billion (about Rs 7,000 crores) denominated in foreign currency is "subject to price, market conditions and other terms and conditions as acceptable, and with conditions allowing for full accounting equity credit and subject to all applicable laws..."
The terms of the rights issue cleared by the Board include price of Rs 220 per fully paid equity share (a premium of Rs 215 per fully paid equity share over face value of Rs 5 per share); and a rights entitlement ratio of 19 shares for every 67 shares held by eligible shareholders, the statement added.
The Board has authorised the 'Special Committee of Directors for Fund Raising' to proceed with rights issue, and determine its terms and conditions including setting the record date, finalisation of the Letter of Offer and other details, and also authorised the 'Committee of Directors' to decide, assess and conclude on the issuance of the Perpetual Bond.
The Indian telecom sector - the world's second largest in terms of subscriber base - has been bruised by falling tariffs, eroding profitability, and mounting debt, amid stiff competition triggered by disruptive offerings of Reliance Jio, owned by India's richest man Mukesh Ambani.
The industry, which is looking at the advent of 5G, has been seeking urgent relief measures entailing debt restructuring, cut in levies, and release of GST input tax credit locked up with the government.
Bharti Airtel recently posted a 72% drop in consolidated net income for the three months ended December 2018 at about Rs 86 crore, amid market turbulence triggered by cut-throat competition in India business.
The Q3 earning scorecard of telecom operators recently presented a picture of contrasts. While rival Reliance Jio posted an overall 65% rise in net profit to Rs 831 crore on a year-on-year basis in the home turf, Airtel's losses from India operations (before exceptional items) stood at Rs 971.9 crore, compared to a net income of Rs 373.5 crore in the year-ago period.
Airtel's consolidated net debt stood at Rs 1.06 lakh crore as compared to Rs 1.13 lakh crore in the previous quarter, and sources said that the fundraising would primarily be used to retire debt.
