Bharti Telecom plans to raise stake in Airtel to over

BHARTI Telecom Ltd (BTL), the holding company jointly owned by Sunil Mittal and Singtel, plans to raise its stake in Bharti Airtel to over 50 per cent through open market purchases, shelving its earlier proposal of buying out the 6.65 per cent holding of Mittal family-owned investment firm.

According to Economic Times (ETT), while the earlier plan would have resulted in the rise in Singtel’s economic interest and fall in the Mittal family’s economic interest, the new plan will result in an increase in the effective shareholding of both the company’s largest shareholders. BTL initially intended to acquire the stake from Indian Continental Investment Ltd (ICIL) that owns 6.65 per cent stake in Bharti Airtel.

“We would like to deny that ICIL is selling its stake,” a Bharti spokesperson told ETT. BTL, 51 per cent owned by the Mittal family, 40 per cent by Singtel, seven per cent by Temasek and the rest by others, would fund the stake buy in Airtel through the proceeds of a Rs 2,503-crore rights issue, among other sources.

Bharti Airtel currently operates in 20 countries across Asia and Africa and has over 300 million subscribers. In Nigeria, Airtel controls 22 per cent market share and enjoys the services of 32.2 million subscribers.

Further, the Mittal family and Singtel is expected to subscribe to the rights issue to maintain their proportional ownership in BTL. Singtel had recently said in a notice that it would infuse Rs 996 crore into BTL as part of the rights issue.

Under the new plan, Bharti Telecom will increase its stake in Airtel from the current 43.96 per cent (as of December 31, 2015) over a period of time.

Consequently, the ownership of Indian promoters and Singtel will increase proportionately to their holding in Bharti Telecom. This in effect will result in the Mittal family increasing its effective interest by 3.6 per cent to 32.86 per cent.

In addition, Singtel’s stake will also increase by 2.66 per cent to 35.03 per cent from the current level of 32.37 per cent. And the combined holding of two promoters will increase to 67.4 per cent.

“The entire proceeds of the (rights) issue along with proposed borrowing will be utilised to acquire further equity shares of Airtel with an intention to ultimately make Airtel a subsidiary of the company (Bharti telecom),” the notice of BTL’s rights issue said.

According to Economic Times, to increase its stake by over six per cent, BTL will need over Rs 8,000 crore at current market prices. The Bharti Airtel stock ended 0.9 per cent higher at Rs 324 on the Bombay Stock Exchange, outpacing a negative benchmark index.

Besides the Rs 2,503 crore that it will raise via the rights issue, it will need an additional Rs 5,500 crore that will be raised through the debt route and internal accruals. BTL will then service the interest on the debt it raises through the dividend income from Airtel.