Fitch upgrades credit rating of Bharti

Fitch upgraded Bharti Airtel's long-term foreign currency rating that will help the company raise funds overseas.

Fitch upgraded Bharti Airtel8217;s long-term foreign currency rating that will help the company raise funds in the overseas market. The agency upgraded Bharti Airtel Ltd8217;s Bharti Long- term foreign currency Issuer Default Rating IDR to 8216;BBB- 8216;BBB minus from 8216;BB8217;. The rating indicates that the company is capable of repaying debts.

The rating reflects the strong financials of the company which has posted healthy growth in various segments.

8220;The rating upgrade reflects strengthening of Bharti8217;s consolidated financial profile over the last three financial years to March 2008 FY08, underpinned by strong earnings growth and a sustained decline in net leverage,8221; the agency said in a release.

It also reflects 8220;that Bharti is well-positioned to manage evolving industry challenges whilst maintaining a sound financial profile.8221;

However, the release said, heavy investments on network on the back of continued high growth has resulted in negative free cash flow.

8220;Although Fitch expects Bharti to continue to generate a moderate amount of negative FCF in FY09, leverage metrics are expected to remain comfortable for the rating, with rising operating cash flows reducing the company8217;s reliance on debt-funding,8221; it added.

The rating also recognises Bharti8217;s track record of achieving consistently impressive operating results, its leading share in cellular services and good growth prospects.

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Cellular services are the key driver of Bharti8217;s consolidated profile, accounting for 63 per cent of revenue and 59 per cent of EBITDA in H109 half-year ended September 2008.

With per-capita wireless penetration still at relatively low levels in India 27 per cent at H109, cellular customers have been growing at a frenetic pace.

Bharti reported a customer base of 77.5 million at the end of September 2008, which represents annualised growth of 50 per cent in H109, and a leading market share of 24.6 pre cent.

Notwithstanding ongoing regulatory developments and intense competition, the company is expected to remain a major beneficiary of ongoing robust mobile growth.

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However, negative pressure could be exerted on the rating in the event of large debt-funded capital expenditure, acquisitions or capital management plans.