Bharti Airtel has burned billions in cash and has accumulated even more in debt in his struggle with the 13th richest man in the world, Mukesh Ambani, the owner of Reliance Jio, as both, along with Vodafone Idea, the battle for get most of the telecommunications from India. market.
As the mountain of debt threatens the survival of Airtel, the company is preparing a rights problem of 250 billion pounds. And it has the support of the government of Singapore. According to a document of change, GIC Pvt Ltd, the sovereign wealth fund of Singapore, is subscribing a fifth of the shares in the issue.
The 50,000 million pound investment will be GIC’s first in India’s competitive telecommunications sector. The measure takes precedence, given that Singapore’s largest mobile operator, Singtel, recently increased its stake in Airtel after investing 27 billion pounds in the company.
In fact, both the promoters of Singtel and those of Airtel will invest
₹118 billion in the issue of rights. After the issuance of rights, Singtel is expected to have a 35% stake in the company.
Earlier this month, Moody’s, an international rating agency, downgraded Airtel’s debt to “significant credit risk” in light of the company’s supercharged nature and cash flow problems. At the end of December 2018, Airtel’s net debt burden was just over ₹ 1.06 trillion.
Last week, Airtel’s board approved a plan to raise ₹ 320 billion of the capital markets, with ₹ 250 billion coming from the sale of shares and the rest through the issuance of bonds denominated in foreign currency.
The capital increase plan will allow India’s second largest telecommunications provider to meet its capital spending targets, pay off debt and effectively take over Reliance Jio, which has consistently consumed its market share and subscriber base since its launch in September 2016.
While the fundraising plan will help Airtel reduce its debt burden, it may not be enough to stabilize its credit rating, according to S & P Global, a rating agency, due to continued capital spending in the midst of price competition. of Jio and Vodafone Idea.
However, Moody’s had a more favorable perspective on the issue of rights, calling it “positive credit“.