Airtel shares were trading 1.25% higher at Rs 705.10 Friday morning trade on BSE.
Late Thursday evening, Airtel in an exchange filing, had said “the rights issue had been subscribed by approx. 1.44 times, overbid by both the public and promoter/ promoter group”. It had added that the “applications received in the rights issue are subject to verification and clearing of payments, as applicable, and finalisation of the basis of allotment”.
Some large global fund houses and private equity players including “Blackrock, Vanguard, and HSBC have renounced their rights entitlements (REs) and sold off their holdings at a decent premium”, a top industry executive aware of details had told ET.
Airtel had not replied to ET’s queries on the specific fund houses that have participated in the rights issue.
The Sunil Mittal-led telco plans to use the issue proceeds to bolster its balance sheet and build a war chest to clear its statutory dues, expand 4G networks, and prepare for an upcoming 5G spectrum auction.
Subscribers to Airtel’s rights issue – which opened on October 5 – need to pay 25% on application and the rest in two additional calls as may be decided by Airtel’s board, though within 36 months. Airtel shareholders will receive one share for every 14 held in the telco at Rs 535 a unit, implying a 7% dilution.
Airtel had said its promoter and promoter group will collectively subscribe to the full extent of their aggregate rights entitlement – or in proportion to their shareholdings in the company. In addition, they will also subscribe to any unsubscribed shares in the issue.
Airtel’s promoter group – the Mittal family and SingTel – hold nearly 56% of the telco with the rest held by the public. The Mittal family directly and indirectly owns around 24.13% while SingTel holds 31.72%.
Analysts estimate that Bharti Airtel’s ongoing rights issue requires its promoters, SingTel and Bharti Enterprises of the Mittal family, to contribute around Rs 6,661 crore and Rs 5,067 crore, respectively. Of this, their immediate 25% upfront contributions work out to Rs 1,665 crore and Rs 1,267 crore, respectively.
People aware of the matter said a high proportion of the issue proceeds are likely to be used to retire high-cost debt. This, they said, would free up cash to expand and deepen Airtel’s 4G network and also get ready for 5G auctions in early 2022, and subsequent 5G network rollouts.
Airtel’s net debt at June end was around Rs 1.6 lakh crore, implying a net debt to Ebidta ratio of around three times, that was deemed “comfortable” by sectoral analysts.
This is Airtel’s second rights issue in just over two years. The telco had raised Rs 25,000 crore via a rights issue in May, 2019. Including that, the carrier has raised $9.8 billion via equity, debt, stake sales in units and assets sales in India and Africa. The deferred payment structure will allow the telco to call for funds as and when it needs. Reliance Industries had adopted this structure in its Rs 53,215-crore rights issue – India’s largest ever – in May 2020.
Lead managers to the Airtel rights issue included Axis Capital, Bank of America, J P Morgan India, Kotak Mahindra Capital, HDFC Bank, Citigroup Global, and Goldman Sachs (India) Securities Pvt amongst others.
