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| Image Credit: Zee Business |
The Sunil Mittal-led telecom business said in a note to stock exchanges on Sunday that shareholders will receive one new share for every 14 shares held at Rs 535 each under the rights offer. The offer represents an almost 10% discount to the stock's BSE closing price of Rs 593.95 on Friday.
According to Airtel, the board completely assessed the industry context, business climate, financial/business strategy of the company and approved the company's proposal to raise additional cash.
The company's promoter and promoter group would jointly subscribe to the entire amount of their aggregate rights entitlement, or in proportion to their holding, according to the statement. They'll also buy any shares in the issue that aren't fully subscribed.
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Nearly 56% of the telco is owned by the promoter group, which includes the Mittal family and Singapore's SingTel.
'To strengthen Airtel's financial position'
The Mittal family controls 24.13 per cent of the company directly and indirectly, while SingTel owns 31.72 per cent. The rest is in the hands of the general populace.
Subscribers to the issue must pay 25% on application and the remainder in two additional calls, as determined by the board based on the company's needs, but within 36 months, according to the statement.
The board of directors of Airtel has formed a special committee of directors to deliberate on other terms and conditions, such as the issuance period and record date for the share offer.
Fitch Ratings senior director Nitin Soni said, The rights offering will bolster Airtel's balance sheet and is a clear positive signal from Bharti promoters about the telco's development prospects, and the possibility of it taking additional market share from ailing Vodafone Idea in coming quarters.
According to him, the cash will provide Airtel "the necessary headroom" to raise capital expenditure on its existing network while also allowing it to compete effectively in the 5G spectrum auction.
This is the company's second rights offering in less than two years, after raising 25,000 crores in May of this year. In India and Africa, the carrier has raised $9.8 billion from equity, debt, unit stake sales, and asset sales.
According to people familiar with the situation, a large amount of the proceeds will be utilised to pay down high-cost debt. This will free up capital to expand and strengthen its 4G network, as well as prepare for the 5G auctions and rollout in early 2022, according to analysts.
Until Sunday afternoon, Airtel has not responded to ET's request for comment.
According to Goldman Sachs, Airtel must pay the government Rs 4,100 crore in adjusted gross income due by March 2022, as well as Rs 8,500 crore in spectrum fee payments in FY23. Airtel also has to keep investing aggressively in its network because it is competing with Reliance Jio for the consumers of financially suffering Vodafone Idea.
If rates remain at present levels, the telco is expected to suffer “an annual cash shortfall of at least Rs 2,000 crore ($270 million)” in FY23, according to the brokerage.
However, a source close to the situation stated the telco has enough funds. However, it has payments due, particularly with the 5G auctions coming up early next year and the subsequent rollouts, as well as forthcoming mandatory obligations, he said.
Brokerage The industry-wide capital expenditure necessary for 5G network rollout across India, including spectrum, sites, and fibre, is estimated to be between Rs 1.3 and Rs 2.3 lakh crore, according to Motilal Oswal. Metro cities and ‘A' circles would receive between Rs 78,800 crore and Rs 1.3 lakh crore.
(Source: Economic Times)
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