Bharti Airtel’s capital increase will keep leverage stable, according to Moody’s

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MUMBAI: Moody’s believes that Bharti Airtel’s new capital increase will keep leverage relatively stable amid growing investments in 5G, ongoing cash payments for spectrum and a settlement payment linked to the Adjusted Gross Income (AGR) dispute with the government.

“The transaction is positive for Bharti,” he said.

He expects the proceeds from the transaction to be used for debt repayment and capital spending, including network upgrades, 5G investments, and growth initiatives such as more aggressive growth. the number of subscribers to wrest market share from the third Indian operator in difficulty, Vodafone Idea.

On August 30, Bharti Airtel announced that its board of directors had approved the raising of new capital through a rights issue of up to ??$ 21 trillion ($ 2.84 billion). Bharti said he would increase equity with a quarter of the proceeds received upfront and the rest in two installments over the next three years.

Bharti’s Debt / Adjusted EBITDA was 3.7x for the 12 months ended June 30, 2021. EBITDA is earnings before interest, taxes, depreciation and amortization. Raising capital, he said, also provides Bharti with greater financial capacity to leverage its network in the Indian mobile space, as competition eases and slows the use of data and l he increase in average revenue per user (ARPU) benefits EBITDA and margins.

“We consider the transaction to be credit neutral for the 31.7% shareholder of Bharti, Singapore Telecommunications Ltd (Singtel). Singtel can subscribe to its share of the rights without a significant increase in leverage. Singtel’s 31.7% stake includes a 14% direct stake and an indirect stake through Bharti Telecom Ltd, ”the rating agency said.

Under the terms of the rights issue, Singtel will be required to pay 25% of the total proceeds on demand and the balance in two additional calls as decided by the board of directors of Bharti, based on the demands of the company in a maximum period of 36 months. .

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