Bharti Airtel to hold Board Meeting on 29th August; Will Consider Capital Options

Bharti Airtel said that it will hold a board meeting on 29th August to consider and approve raising funds. India's second largest telco will consider equity, equity linked or debt instruments, or a combination to raise funds.

Bharti Airtel Looking for Funds

In a notice to the stock exchanges on Wednesday, the telco said, “we wish to inform you that a meeting of the board of directors of the company is scheduled on Sunday, August 29, 2021, to inter-alia consider various capital raising options through equity or equity linked or debt instruments or any combination there-of, as the board may deem appropriate."

Chairman Sunil Mittal said that over the last 24 months, the telco has raised about $12 billion. But "...one can never say never to raising fresh capital, (though) there is nothing immediately in the pipeline", he said. Incidentally, the telco reported an increase in its net debt in the Q1FY22 results. However, it had a net debt to EBITDA ratio at around 3 times; a 'comfortable' position, per industry analysts.

This move comes in the backdrop of the telco's AGR and spectrum dues of around Rs 13,000 crore. Bharti Airtel has to pay the amount in the first half of 2022. The telco also said that it will help strengthen its balance sheet. If the telco succeeds in raising funds, it will mount even more pressure on Vodafone Idea; the struggling third largest telco has also been trying to raise cash.

Bharti Airtel's Cash Needs

Goldman Sachs said that the telco has to pay about Rs 4,100 crore in AGR dues by March 2022. Moreover, it has further spectrum obligations worth Rs 8,500 crore coming up in FY23. This does not include the significant capex Airtel needs to invest in its 4G network, to remain competitive. The brokerage also estimated “an annual cash shortfall of at least Rs 2,000 crore ($270 million) if tariffs stay at current levels,” in FY23.

This just goes to show the situation of the Indian telecom sector; low ARPUs have brought Vodafone Idea to the brink, and other telcos have started to face issues.

Motilal Oswal estimated that the telco needs to spend around Rs 1.3-2.3 lakh crore to upgrade network to support 5G. Out of this, Rs 78,800 crore-1.3 lakh crore will go to upgrade network in metro cities and ‘A’ circles. However, the telco has started to restructure its digital and telecom assets, to monetize it better and be in an position to invest in 5G.

This new corporate structure will see the telco's telecom business shipped off to a new unit, Airtel Ltd. Bharti Airtel will hold its digital assets. Moreover, Airtel Payments Bank, along with Airtel Africa, Indus Towers, and Nxtra will make up other units under the Bharti Airtel umbrella.