Airtel prepays over Rs 22,000 crore of domestic loans

In the fiscal fourth quarter ended March 2019, Airtel’s net finance cost rose 30.2% sequentially and 38.4% on year, which continue to drag profitability.

KOLKATA | MUMBAI: Bharti Airtel has prepaid over Rs 22,000 crore of rupee-denominated domestic loans to multiple banks using a majority of the carrier’s Rs 25,000-crore rights issue proceeds, people familiar with the matter said. The payments will sharply reduce Airtel’s net finance costs and free up capital to expand its 4G network and buy spectrum in the next auction to take on Reliance Jio more effectively.

The Sunil Mittal-led telco has prepaid a loan of about Rs 6,000 crore to Axis Bank, and cleared additional loans, aggregating upwards of Rs 16,000 crore to other local banks, including State Bank of India (SBI), ICICI Bank and HDFC Bank, a person with direct knowledge told ET. These loans were taken by the telco to finance working capital needs.

Bharti Airtel did not reply to ET’s queries. The named banks too did not reply to ET’s queries.

Rajiv Sharma, co-head of research at SBICap Securities, estimates any prepayment of rupee loans, upwards of Rs 22,000 crore, would translate in a near Rs 2,000 crore reduction in Airtel’s annual net finance costs, improve leverage and also boost its credit rating, going forward.

Rupee-denominated loans, typically, attract 8.5-9% interest, which is higher than the rate on overseas loans.

In the fiscal fourth quarter ended March 2019, Airtel’s net finance cost rose 30.2% sequentially and 38.4% on year, which continue to drag profitability. The company’s net consolidated debt stood at $15.65 billion (Rs 1.08 lakh crore) in the March quarter, up from Rs 1.06 lakh crore at the end of December, 2018. Of this, India mobile business debt was estimated at nearly $11billion (Rs 77,000 crore approx) at March end.

“Airtel’s move to lower debt will be viewed positively by markets, given the current environment of heightened risk aversion towards highly leveraged corporates,” said Ajay Bodke, CEO (PMS) of Prabhudas Lilladher, a Mumbai-based brokerage firm.

Bharti Airtel shares rose over 1% to close at Rs 348.45 on BSE on Tuesday.

Analysts expect the effects of the prepayment to reflect in the telco’s June quarter earnings.

Airtel’s recent decision to raise a whopping Rs 32,000 crore through the Rs 25,000-crore rights issue and bond sales of Rs 7,000 crore was one of the largest fund-raising exercises by an Indian company. Its stated objective was to cut debt and financing costs and boost cash flows to meet capex needs.

The company is also raising $750 million separately through an IPO of its Africa unit, besides preparing to sell a significant stake in the Bharti Infratel-Indus Towers merged entity.

Brokerage Credit Suisse estimates that Airtel’s net debt to Ebitda or leverage ratio would fall to 3.3x (from around 4.4x level), on the rights issue proceeds and a likely sale of a further stake in Bharti Infratel.

Global ratings agency Fitch expects Airtel’s revenue and operating income (read: Ebitda) to grow by mid-single digit percentages in FY20, during which the telco is also estimated to pump in a whopping $4 billion ( Rs 28,000 crore) of capex to bolster 4G networks and fibre optics infrastructure.

Further, it estimates the company’s India mobile business Ebitda will rise 15-20% this fiscal, driven by strong growth in data usage and higher blended ARPU, especially as competition eases and incumbents focus on profitability.




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