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Bharti Airtel To Raise Rs 21,000-Cr Via Rights Issue; Board Approves Rs 535 A Piece
The terms of payment of issue price, envisage 25 per cent on application and balance in two more additional calls as may be decided by the board or its committee based on the company’s requirements within an overall time-horizon of 36 months
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Telecom operator Bharti Airtel’s board on Sunday approved raising up to Rs 21,000 crore by way of rights issue, at a price of Rs 535 per share, according to a regulatory filing. The mega fundraising is bound to give more firepower to Airtel, as the company takes on rivals in the fiercely-competitive Indian telecom market.
India, which is the world’s second-largest telecom market and the biggest data consumer, is now gearing up for 5G that will significantly scale up connectivity pipes, enabling ultra-high-speeds and new-age applications for users, and new revenue streams for players. Airtel’s board, which met to consider the company’s capital raising plans, cleared rights issue price of Rs 535 per fully paid-up equity share, including premium of Rs 530 per equity share.
In a BSE filing, Airtel said that the “…board approved the issuance of equity shares of face value of Rs 5 each of the company on rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of up to Rs 21,000 crore". The rights entitlement ratio entails one equity share for every 14 equity shares held by eligible shareholders as on the record date.
The terms of payment of issue price, envisage 25 per cent on application and balance in two more additional calls as may be decided by the board or its committee based on the company’s requirements within an overall time-horizon of 36 months, Airtel said. “The promoter and promoter group of the company would collectively subscribe to the full extent of their aggregate rights entitlement," it said.
The company added that “they will also subscribe to any unsubscribed shares in the issue". Promoter holding in the company stands at about 55.8 per cent, while public holds 44.09 per cent.
The board of Airtel has constituted a ‘Special Committee of Directors’ to decide the other terms and conditions of the issue including issue period and the record date. The board of directors at the meeting reviewed the industry scenario, business environment, financial and business strategy of the company and approved the plan to raise further capital, Airtel said.
Put simply, a rights issue is an offer to existing shareholders to buy additional new shares in the company. The shares of Airtel had closed at Rs 593.95 apiece on Friday, 1.21 per cent higher than the previous close.
In its note last week, Jefferies had said that any capital raise by Bharti Airtel that aims to enhance capacity in anticipation of large market share shifts from Vodafone Idea could be seen “positively". Sunil Mittal-led Bharti Airtel is the second largest telco in the three private player market and as per subscriber data released by telecom regulator recently, Airtel added 38.1 lakh wireless subscribers in June, pushing up its mobile user base to 35.2 crore.
Reliance Jio, which has been cementing its lead, gained 54.6 lakh users in June, as its mobile subscriber base swelled to 43.6 crore during the month. In a fundraising spree last year, Jio Platforms, which houses India’s youngest but largest telecom firm Jio and apps, had raised about Rs 1,52,056 crore from marquee investors, including Facebook, Google, General Atlantic, KKR, Mubadala, ADIA, TPG, Intel Capital, Qualcomm Ventures, and others.
Vodafone Idea Ltd (VIL), the third operator in the sector, is struggling to stay afloat and analysts have sounded an alarm over potential risk of the market turning into a duopoly. Vodafone Idea lost about 42.8 lakh subscribers during June, and its user base shrunk to 27.3 crore, compounding woes of the debt-laden telco that is in grip of an existential crisis.
Recently, billionaire Kumar Mangalam Birla stepped down as chairman of Vodafone Idea Ltd, within two months of offering to hand over Aditya Birla Group’s stake in the telco over to the government, in a bid to avert a crisis for the telecom company. The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021, of VIL stood at Rs 1,91,590 crore, comprising deferred spectrum payment obligations of Rs 1,06,010 crore and an adjusted gross revenue (AGR) liability of Rs 62,180 crore that are due to the government.
Industry body COAI has urged the government for financial reforms in the telecom sector, making a strong pitch for cut in levies, doubling tenure of auctioned radiowave holdings, along with 7-10 year moratorium for spectrum payments, to address viability concerns. While there is no official word yet on the specific relief measures in the making, sources said the government believes there must be “good competition" for orderly growth of the telecom sector. It is committed to consumer interest and meeting larger societal objectives such as online education and e-learning through a robust digital and communications infrastructure in the country, they said.
As per data from the communications ministry, while the total AGR dues of various telecom companies (both private and state-owned telcos) aggregated to Rs 1,69,048.65 crore, payment totalling Rs 30,283.59 crore has been received till date, and nearly Rs 1,38,765 crore is outstanding payable. For Bharti Airtel Group, whose overall dues stood at Rs 43,980 crore, payment of Rs 18,004 crore has been received even as Rs 25,976 crore is outstanding payable.
Last year, the Supreme Court had said that telcos would be required to make the payment of 10 per cent of the total dues by March 31, 2021, while balance dues are to be paid in annual instalments commencing from April 1, 2021 up to March 31, 2031, payable by 31st March of every succeeding financial year.