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Last Updated : Jul 19, 2019 05:27 PM IST | Source: PTI

Bharti Airtel could raise Rs 25,000 crore more from stake sale in merged tower entity: Moody's

Sale of a significant stake in its tower assets would help in further debt reduction, the ratings agency added.

 
 
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The recent round of fund-raising will strengthen balance sheet and improve cash flows of telecom company Bharti Airtel, which could raise an additional $3.5 billion by selling majority stake in the tower firm formed through merger of Infratel and Indus Tower, Moody's said July 19. But while the company's leverage is improving, a rating stabilisation will be driven by operational improvement in Indian mobile operations, Moody's said in its latest report.

Sale of a significant stake in its tower assets would help in further debt reduction, the ratings agency added.

"We expect Bharti to ultimately sell a significant stake in the tower company formed from the merger of Infratel and Indus Tower, although it may retain a minority stake. Assuming a premium to Infratel's average closing price in July, we estimate Bharti could raise an additional $3.5 billion (about Rs 25,000 crore) of cash," it said.

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If these proceeds too are applied to debt reduction activities, Bharti's leverage could fall below 3.5X by fiscal 2020, the report said, adding in the same breath, that this was Moody's "hypothetical scenario" and should not be interpreted as predictive of an outcome.

Moody's report noted that Bharti Airtel had completed a Rs 25,000 crore ($3.5 billion) rights issue in May and the listing of its African subsidiary, Airtel Africa Ltd, which raised $750 million in June. It said that proceeds from recent capital-raising activities will strengthen balance sheet and improve cash flows for the company.

"Despite a significant fall in Bharti's absolute debt, leverage will remain above 3.5x, the threshold for outlook stabilization," it added.

Although cash flows will increase as interest costs fall, a meaningful expansion of organic profitability at Bharti's Indian mobile operations is needed to improve its credit profile, Moody's said.

"We expect Bharti's capital spending and network costs to remain high as competition remains intense. Following an eventual tower asset sale and the dilution of its stake in Airtel Africa, Bharti will rely more heavily on organic cash flow from the Indian operations to meet ensure adequate financial flexibility going forward," it added.

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First Published on Jul 19, 2019 05:20 pm
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