Bharti Airtel Limited’s rights issue is credit positive for the company, as per Moody’s Investors Service. According to Moody’s, the new capital would keep the leverage reasonably constant amid 5G spending, continuous cash payments for spectrum, and adjusted gross revenue (AGR) settlement outgo. However, for Singapore Telecommunications (Singtel), Airtel’s 31.7 per cent shareholder, Moody’s described the deal as credit neutral.

Airtel’s board has approved raising up to Rs 210 billion via a rights issue, trading at Rs 535 per share.

Moody’s Investors Service said the proceeds from the transaction are expected to be used for debt repayment and capital expenditures, including network upgrades, 5G investments, and subscriber growth campaigns to wrest market share from Vodafone Idea.

Moreover, the fundraising gives Airtel more financial capacity to leverage its network in the Indian mobile space, as competition eases and tailwinds from higher data usage and an increase in average revenue per user (ARPU) benefit both EBITDA and margins, Moody’s noted.

Singtel owns 31.7 per cent of the company directly and indirectly through Bharti Telecom Limited. Moody’s noted that Singtel would have to pay just $100 million as an upfront payment for subscribing to rights in Bharti, with the remaining $ 300 million being callable over the next 36 months. This can be accommodated within Singtel’s ratings.

Singtel’s leverage will weaken if it is forced to make more debt-financed payments for BTL’s rights.