Bharti Airtel to sell 5 stake for Rs 6,796 cr to QFE

Bharti Airtel on Thursday said it will sell 5 per cent stake to Doha-based Qatar Foundation Endowment for 1.26 billion Rs 6,796 crore to strengthen its capital structure and fund its growth plans.

According to the structure of the deal,Bharti will issue fresh 199.9 million shares to Qatar Foundation at Rs 340 a share,which is at 7.4 per cent premium to its closing price on May 2.

The announcement saw Bhartis share rising as much as 4.7 per cent to finally close up 0.32 per cent at Rs 317.70 on the Bombay Stock Exchange.

Following the issuance of shares,the promoter groups stake in the company will reduce to 65.12 per cent from 68.55 per cent. Qatar Foundation Endowment is the investment vehicle for Qatar Foundation,a non-profit organisation,wholly owned by the Gulf states royal family. Goldman Sachs advised Bharti on the deal.

The company,which on Thursday posted its 13th quarterly decline in net profits at Rs 509 crore,needs funds to retire its debts as the African operations continue to post losses and report a decline in almost all operating metrics. At the end of the March quarter,Bhartis net debt stood at Rs 63,839 crore,which was mainly raised to fund its 9-billion acquisition of the African operations of Zain in 2010.

Further,Bharti needs funds to pay for one-time spectrum charges and renewal of its Delhi and Kolkata licences when they come up for renewal in November. While currently it has obtained a stay order from the Delhi High Court on the over Rs 5,000-crore one-time payment for spectrum held beyond 4.4 MHz,the government is working on the modalities of auction for the extension of licences after it rejected Bhartis application for an automatic extension.

Commenting on the latest fund-raising exercise,Bharti chairman Sunil Mittal said,I am delighted to welcome another high-quality long-term institutional investor to our shareholder base.

Story continues below this ad

This strategic partnership with QFE demonstrates the confidence they have in the company and our strategy for growth. In addition,this agreement exemplifies further strengthening of the already deep economic and cultural relations between Qatar and India. We look forward to a long and fruitful partnership with QFE, Mittal said. Rashid Al-Naimi,acting chief executive officer,QFE,said,We are excited to be making a significant investment in one of the leading telecommunications companies in the world. As a long-term global investor,our shareholding gives us exposure to a high growth sector in key emerging markets.

We believe the transaction is positive as it improves Bhartis balance sheet strength. Its FY13 net debt to Ebitda reduces to 2.29 times versus 2.57 times currently. It makes headroom for Bharti to make regulatory payments, UBS Investment Research said in a report.