Singapore Telecommunications Ltd. (Singtel) has reportedly announced plans to buy Bharti Airtel stocks worth $525 million as part of the Indian telecom operator’s plan to secure $4.6 billion from shares and bonds.
As per trusted sources, Airtel plans to use the money to slash off debt and shore up its balance sheet at a time when the wider Indian telecom sector is struggling with a price war triggered by Reliance Jio Infocom’s foray into the market.
Under the fund-raising plan declared in February, Airtel plans to sell more shares worth $3.6 billion for INR 220 per share, or at a discount of nearly 30 percent on its current stock price. The company will additionally raise INR 70 billion more from foreign currency denominated bonds, reported sources.
Post the announcement of the fund-raising last month, Saurab Handa, an analyst for Citi, said in a statement that this should be a positive move, given the concerns related to balance sheet strength among incumbents, particularly at a time when constant investments in 4G are dominant.
As of December 31, Airtel’s net debt exceeded $15 billion while its present market value is approx. $17.5 billion. Meanwhile, Singtel had a net debt of $7 billion at the time, cited sources.
The Singaporean telecom operator stated it will acquire 170 million new stocks in Airtel, which is India’s 2nd largest telecom company in terms of subscribers. Reportedly, this development is expected to reduce its current interest in Airtel to 35.2 percent from 39.5 percent.
Singtel has often mentioned its plans for a long-term investment in Airtel. Additionally, the operator also owns less than half of Bharti Telecom, Airtel’s holding company.
Arthur Lang, the Chief Executive Officer of Singtel’s International Group, said in a statement that the company’s participation in these rights offering, highlights its long-term commitment to Airtel and confidence in India’s future in Telecom.
In February, Singtel’s third-quarter net profit declined by 14% as Airtel’s earnings plummeted by three quarters in December, reported sources.