Telecom operator Bharti Airtel is looking to onboard a strategic investor through allocation of preferential equity shares, which is scheduled to be discussed at its board meeting on January 28, according to sources.
A source, who did not wish to be named, said the primary goal of the preferential share allocation is not influenced by any sort of liability pressure but is inclined towards onboarding a strategic partner aligned with the long-term business objectives of the company. Jefferies Equity Research, in a report, said Bharti Airtel’s announcement to consider an equity issuance on preferential basis has come as a surprise as there is no immediate need for capital, in its view.
“An issuance to usher in a strategic investor that boosts its enterprise/digital offerings will be seen positively; however, any large acquisitions will be viewed negatively,” the report said. Bharti Airtel has notified the exchanges that its board will on January 28 consider a proposal for issuance of equity capital through a preferential issue. However, it did not specify the quantum of the capital raise or its timing.
“The issuance will be to non-promoters implying that promoter stake in the company will get diluted post the potential issue,” Jefferies said. Bharti Airtel had in December cleared payments for spectrum that it acquired through auction in 2014. The company paid Rs 15,519 crore to the Department of Telecom for 128.4 MHz spectrum (including Telenor spectrum) that it acquired for Rs 19,051 crore in 2014. The net debt on the company was about Rs 1.66 lakh crore as on September 30, 2021.
Jefferies said the move comes as a surprise because the company recently made spectrum payments, it can call its pending rights issue capital of Rs 15,700 crore at a month’s notice, recent tariff hikes will boost its cash flows further and there is no visibility of 5G auctions in the near future. “Given that Bharti’s business does not need capital immediately, a preferential equity issuance could be due to a strategic investor entering Bharti Airtel or an acquisition by Bharti Airtel,” the report said.