The ratings agency has also reaffirmed the ‘CRISIL A1+’ rating on Airtel’s Rs 15,000 crore commercial paper programme.
Crisil Ratings expects “further improvement” in Airtel’s overall credit risk profile over the near to medium term on the back of improving cash accruals, the telco’s deleveraging plans, including the upcoming rights issue, notwithstanding adjusted gross revenue (AGR) dues and additional expenses incurred in acquiring spectrum in the last 4G auction in March.
“The ratings continue to reflect Airtel’s strong market position and improving operating performance of the domestic mobile and non-mobile segment, diversification across businesses, healthy operations in Africa, improving debt protection metrics and high financial flexibility,” Crisil Ratings said.
It, though, said these strengths “are partially offset by the company’s exposure to regulatory and technological risks”.
Bharti Airtel shares closed nearly 3.7% lower at Rs 696.25 on BSE Tuesday.
Going forward, Crisil expects Airtel’s average revenue per user (ARPU) – a key performance metric — to improve, aided by recent price revisions in some plans and uptrading by subscribers, resulting in further improvement in operating revenue and profit. It also believes that a broad based tariff hike as was last seen in December 2019, is likely within the next six-nine months.
In late-July, Airtel had scrapped its entry-level Rs 49 prepaid plan and made its base prepaid plan 61% costlier at Rs 79. It had also raised the entry postpaid rates for corporate users. Airtel’s ARPU in the June quarter was at Rs 146, the highest in the industry.
Crisil Ratings also expects Airtel’s net leverage to “sustain below 2.5 times” as it believes any significant increase in investments towards 5G rollout would be cushioned by the already announced rights issue.
Airtel’s rights issue of nearly Rs 21,000 crore will open on October 5 and close on October 21. Its shareholders will receive one share for every 14 held in the telco at Rs 535 a unit.
Crisil, however, expects the telco’s participation in the upcoming 5G spectrum auction could be limited at current reserve prices. “Besides, capex to build a 5G network should not materially change capex outgo from the current levels,” it added.
Meanwhile, Crisil has withdrawn its `AA/Stable’ rating on the telco’s Rs 1,500 crore non-convertible debentures (NCDs) as they have been fully repaid. The ratings agency has received a confirmation of “no dues against these NCDs” from the debenture trustee.
