Moody's changes Bharti Airtel's outlook to positive from stable

Bharti Airtel | Representative image

Moody's Investors Service on November 23 revised Bharti Airtel Ltd.'s (Bharti) and its subsidiary Bharti Airtel International (Netherlands) BV's ratings outlook to positive from stable.

"The outlook change to positive reflects Bharti's improving operating performance and credit metrics which, if sustained, could support an upgrade to investment grade within the next 12-18 months," Moody's Senior Vice President Annalisa Di Chiara said.

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"The continued expansion of profitability, particularly at its core Indian mobile business, together with a steady reduction in its balance sheet debt, is needed to mitigate the potential effect on Bharti's credit metrics of significant investments in 5G and the compounding growth of deferred liabilities during the moratorium period," Moody's lead analyst for Bharti Di Chiara added.

The firm reported a 27 percent increase in its consolidated reported EBITDA to Rs 272 billion for the six months ended September 30, 2021, compared with the same period in 2020.

Among other things, Moody's  expects Bharti's consolidated adjusted EBITDA to increase toward  Rs 570 billion - Rs 585 billion by the end of fiscal 2022, which ends 31 March 2022 -- around a 25 percent increase over fiscal 2021's.

Earlier in August 2021, Bharti announced a Rs 210 billion rights issue which included an upfront payment and two tranches to be raised over the next three years. The firm raised he upfront amount of Rs 52.5 billion in October 2021, that Moody's expects will be used to reduce debt.

Bharti Airtel has also accepted the four-year moratorium for payment of its statutory dues payable to the government comprising around Rs 500 billion of spectrum liabilities and Rs 280 billion of annual gross revenue (AGR) dues -- both amounts as of 31 March 2021. However, the moratorium is only up to 30 September 2025.