Airtel Board Approves Rs 28,220 Crore Share Swap with ICIL

Bharti Airtel, the second-largest telecom operator, will soon be swapping its shares with ICIL (Indian Continent Investment Limited) for Airtel Africa. This is a part of corporate restructuring under Bharti Enterprises. It is to consolidate control over the subsidiary Airtel Africa. The deal is worth Rs 28,220 crore. This is a share swap deal, which means that there is no cash involved at all.

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What is Changing for Airtel and ICIL and Airtel Africa?

Bharti Airtel has decided to give 2.3% out of its stake to ICIL, and against that, Airtel will get 16.31% stake in Airtel Africa. Airtel will issue 146.7 million new shares at Rs 1923 a piece for ICIL, representing a 9.5% premium to the previous closing price (May 13). ICIL’s entire stake of about 595.2 million shares (16.31%) in Airtel Africa will be transferred to Airtel in this share swap deal.

This will take Bharti Airtel’s shareholding in Airtel Africa to 79.04% from the previous 62.73%. At the same time, ICIL will increase its stake in Bharti Airtel from 0.95% to 3.25%.

Airtel is Getting Airtel Africa at a Discount, ICIL is Getting Airtel at Premium

Bharti Airtel is giving away the 146.7 million new shares to ICIL at a premium of 9.5% from the previous closing price. At the same time, ICIL is giving Airtel Africa shares to Airtel at a discount of 11.6%. ICIL is getting the shares of Airtel at a premium, while Airtel is getting Airtel Africa at a discount. This creates a winning scneario for the Bharti Group.

Airtel’s board, in a notice to the stock exchanges said, “The board recognised that the transaction is in line with the objective of consolidating/strengthening shareholding in a strategic subsidiary. Apart from being cashless and leverage-neutral, the transaction is accretive to EPS (earnings per share) of Airtel India with additional earnings outweighing the dilution.”

If it was an all cash deal, it would have required Airtel to tap into its cash reserves, which would not have been an ideal scenario for a company in the Indian telecom sector, which requires telcos to spend thousands of crores in capex (capital expenditure).