Bharti Airtel Could Soon Become a Totally Foreign Entity With New Investments

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Bharti Airtel Could Soon Become a Totally Foreign Entity With New Investments

The telecom companies in India are in desperate need for cash flow and investment. Some of the biggest telcos in India, including Vodafone Idea and Bharti Airtel, are facing a financial crunch due to the AGR dues which were also the reason for the massive losses of the telecom companies in the last quarter. However, for the Sunil Bharti Mittal led telecom operator, Bharti Airtel, things might start to look better as the Department of Telecommunications (DoT) has approved 100% Foreign Direct Investment (FDI) meaning that now the door for foreign investors is open in the case of Bharti Airtel. Previously, the cap for FDI in Bharti Airtel was 49%. This report comes from ET. The telecom operator confirmed the news on January 20 itself saying that Bharti Airtel has received the approval of the DoT for 100% FDI. The announcement was made via a letter made for a regulatory filing.

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Airtel Raises $2 Billion in Share Placements

In the statement, the telecom operator also said, “It may also be noted that subject to applicable laws, the aforesaid approval read together with the RBI (Reserve Bank of India) approval dated July 3, 2014, granted to the company allows the FPls/Flls to invest up to 74% of the paid-up capital,” The decision to allow foreign investors to invest more freely in the company came after the group of promoters with stake in Bharti Airtel decreased their total share in the company down to 58.98% from 62.70%. This happened because Bharti Airtel raised $2 billion by private share placement to investors which included GIC, Fidelity, BlackRock, Goldman Sachs, Citigroup, Schroder, Warburg Pincus and Segantii Capita. After the placement of the shares and raising funds, the total foreign holding in Bharti Airtel is 44.28%.

Share Placement Skews Ownership

Now the struggle for the Mittal family and SingTel is to raise the ownership of the two entities to the previous levels and to level the stakes. Both of the parties will do so via Bharti Telecom. To recall, Bharti Telecom had sought permission from the government to raise Rs 4,900 crore from SingTel and other entities. It is worth noting that 52% share in Bharti Telecom is owned by the Mittal family. Bharti Telecom, in turn, has about 40% stake in Bharti Airtel. On the other hand, the Singaporean telecom firm, SingTel owns around 48% stake in Bharti Telecom. Now, if Bharti Telecom raises funds from the group of promoters which are overseas such as its own entities or SingTel, then the total foreign investment in the company might exceed 50%.

Bharti Airtel Might Become Totally Foreign-Owned

Even a tiny bit of increase in the foreign investment in Bharti Airtel would make it a foreign entity. When that happens, Bharti Airtel would be considered a foreign firm. Also, Bharti Telecom’s entire stake in the company would also be considered as foreign investment, Bharti Telecom has noted. If all of this happens, then the total foreign investment in Bharti Airtel might cross 85%, according to the experts. This might mean that Bharti Airtel might have to seek approval for increasing the foreign investment in the company to 100%.

Bharti Airtel to Pay Rs 35,500 Crore Dues

Currently, Bharti Airtel is facing dues worth Rs 35,500 crore which the telecom company has to pay to the Department of Telecommunications (DoT). This is on account of the Supreme Court decision, which ruled that the AGR would be calculated with the non-core items and not just core telecom services. The telecom operator is trying hard to seek a longer payment timeline for paying up these dues.

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