Airtel Seeks Urgent AGR Dues-to-Equity Conversion Amid Mounting Promoter Debt

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Airtel Seeks Urgent AGR Dues-to-Equity Conversion Amid Mounting Promoter Debt: Report
Bharti Airtel has urged the Department of Telecommunications (DoT) to expedite the conversion of over Rs 41,000 crore in adjusted gross revenue (AGR) dues into government equity, citing rising debt at its promoter-level entity, Bharti Telecom Ltd (BTL), and the need to bolster its balance sheet to fund future investments, ETTelecom reported, citing sources.

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Also Read: Bharti Airtel Writes to DoT for Equity Conversion of Statutory Dues: Report

BTL’s Debt Raises Credit Rating Concerns

In follow-up letters to the DoT, Airtel highlighted that BTL’s debt has reached nearly Rs 40,000 crore by the end of FY25, up from Rs 15,900 crore two years ago. The telecom operator noted that the financial strain on its promoter group has significantly limited their ability to infuse further capital, raising concerns among rating agencies, according to sources cited in the report.

These agencies often consolidate the debt of holding companies like BTL with that of operating entities such as Airtel, potentially affecting Airtel’s credit ratings.

“Airtel has warned that any potential downgrade will adversely impact its own ability to raise further debt,” a source aware of the matter said, as per the report.

Maintaining strong credit ratings, the telco said, is essential for accessing funding for future infrastructure and technology upgrades, including 5G standalone (SA), 6G, fibre networks, submarine cables, and data centres.

Also Read: Government Stake in Vodafone Idea Rises to 48.99 Percent After Fresh Equity Allotment

BTL has No Operating Revenues

BTL, which holds a 40.47 percent stake in Airtel, is jointly owned by Singapore Telecommunications (Singtel) and the Mittal family’s Bharti Enterprises, with 49.44 percent and 50.56 percent stakes respectively. It has no operating revenues and relies solely on Airtel dividends for income. In recent years, BTL has taken on significant debt to acquire stakes from both the Mittal family and Singtel, pushing its debt-equity ratio to 5.4 as of December 2024, from 0.24 in June 2022.

“In its correspondence with the government, Airtel also said it carries a debt burden of Rs 1.77 lakh crore, a bulk of which was AGR dues, and that it was important for the company to maintain strong ratings in order to have potential access to capital in the future,” the person cited earlier said, according to the report.

Asset Sales Not a Sustainable Strategy

Airtel has been divesting assets, including stakes in its Africa operations, to raise funds. However, it indicated to the DoT that it has limited room for further asset sales without compromising long-term financial stability and market competitiveness.

“The company said any further asset sale may impact its overall stability and become vulnerable to competitive moves,” another person cited in the report said.

Also Read: Bharti Airtel’s AGR Dues to Be Scrutinised by DoT for Equity Conversion: Report

Supreme Court AGR Ruling

The company emphasised that the Supreme Court’s AGR ruling had placed substantial financial stress on its operations, undermining its ability to invest aggressively in network and technology expansion. It argued that converting the AGR dues into equity would provide much-needed fiscal relief and enable continued infrastructure rollout.

In recent years, Singtel and the Mittal family have been shifting their direct holdings in Airtel to BTL. BTL has invested approximately Rs 38,100 crore in Airtel over the past few years, including an initial Rs 1,900 crore contribution in the October 2021 rights issue.

Also Read: Bharti Telecom Raises Stake in Airtel to 40.33 Percent

Equity Conversion Could Boost 5G and 6G

It is also required to contribute an additional Rs 5,800 crore towards pending calls on the same issue, which will likely need to be funded through higher dividend inflows from Airtel, the report said citing unnamed Analysts.

“If the government agrees to the equity conversion, it will strengthen Airtel’s balance sheet and cash flows, allowing it to invest in fibre, data centres, submarine cables and emerging technologies like 5G SA and 6G, Airtel has told DoT,” one of the sources mentioned in the report said.

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