While perpetual securities with no fixed maturities are expected to offer 4.375 percent with a call option, other bonds may be priced after adding 230 basis points over the benchmark US treasury with over 10-year maturity, market sources said.
“Pricing could be tighter depending on investor demand for those papers,” said one of the bankers involved in the exercise. Both the issuance will be at least of a standard benchmark size.
About nine investment banks including Bank of America, Barclays, Citigroup, JP Morgan, HSBC, and Standard Chartered Bank are helping the telco raise about $1 billion (Rs 7,500 crore) via such offshore bonds. The subscription window is expected to be closed late in the evening today.
The fundraising is aimed at building a war-chest even as India’s second-largest telco needs cash to buy spectrum in the upcoming 4G auction, invest in networks and also pay statutory dues, among other needs.
The overseas bonds are likely to be raised by Airtel’s Mauritius arm, Network i2i, and guaranteed by the telco.
Fitch Ratings assigned ‘BB’ grade to the perpetual papers, billed as quasi-equity, which is two notches lower than the other set of bonds, marked as BBB-, the lowest rank in the investment grade category.
We expect Bharti to generate small positive free cash flow (FCF) in FY21 on flat core capex, lower interest costs and the government’s two-year moratorium on the payment of existing spectrum dues, which will defer about USD840 million in each of FY21 and FY22,” the global rating company said in a note.
BNP Paribas, DBS Bank and SMBC Nikko are among others helping the borrower in the bond sales.
Airtel’s latest fundraise plans come after it returned to the black by posting an Rs 854 crore net profit in the December quarter after six straight quarters of losses, on the back of a one-time gain linked to the Bharti Infratel and Indus Towers merger and strong mobile broadband user adds that led to record revenue.
India’s second-largest telco has already raised some $8 billion in the last couple of years. The latest fundraise plans come after the telco recently demonstrated live 5G services on its 4G network using the 1800 Mhz band and said it can commercially launch 5G with existing 4G airwaves in a few months.
Airtel also owes the government nearly Rs 26,000 crore as adjusted gross revenue (AGR) dues.
