Bharti Airtel to sell 5% to Qatar Foundation for US$1.26bn - Angel Broking

In a move seen as a positive deleveraging exercise, Bharti Airtel on Friday decided to sell a 5% stake to Doha-based Qatar Foundation Endowment for US$1.26bn (Rs. 6,796cr) to strengthen its capital structure and fund its growth plans. According to the structure of the deal, Bharti will issue fresh 199.9mn shares to Qatar Foundation at Rs. 340 a share, which is at 7.3% premium to its closing price on May 2. The deal values the company at Rs. 135,920cr. Following the issuance of shares, the promoter group's stake in the company will reduce to 65.12% from 68.55%.

Qatar Foundation Endowment is the investment vehicle for Qatar Foundation, a non-profit organization wholly-owned by the Gulf state's royal family. The move to deleverage is positive as it improves balance sheet strength and will help ease the debt burden; Bharti Airtel currently has debt of ~Rs. 63,700cr. This will reduce the net-debt to Ebitda ratio to 2.3:1 from 2.6:1. The company claimed the investment would strengthen its capital structure and give it flexibility to deliver on its growth strategy. The company faces payouts amounting to thousands of crores in regulatory fees and spectrum charges in India. Its mobile permits are up for renewal from next year as well. We currently maintain our Neutral rating on the stock.

Source : Equity Bulls

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