Bharti Telecom might raise debt to fund recent purchase of Airtel stakes, says IIFL Securities

According to IIFL Securities, Bharti Telecom, a key promoter company of Bharti Airtel, will need to raise debt to fund the recent purchase of a 3.33 per cent stake in the telecom operator from Singtel for $1.61 billion (approximately Rs 129 billion). The brokerage firm mentioned that the aforesaid move would be considered by Bharti Telecom as Singtel has ruled out any fresh equity infusion in Bharti Telecom. The Mittal family of Bharti Enterprises and Singtel own 50.56 per cent and 49.44 per cent, respectively, in Bharti Telecom.

Moreover, IIFL Securities does not expect Singtel to sell any further stake in Bharti Airtel beyond the equalisation of shareholdings targeted by the Singtel and Bharti Enterprises in Airtel. Meanwhile, IIFL estimates that post-conclusion of the Singtel deal, Bharti Telecom’s debt would rise to Rs 155 billion and its participation in future calls for Airtel’s rights issue (by late-2024) would entail another Rs 60 billion.

Besides, the brokerage firm expects the Singtel and Bharti Telecom deal to happen off-market as Singtel selling entities are domiciled in Mauritius, which means there won’t be any capital gains tax implications. However, on completion of the stake sale, Bharti Telecom will own 38.75 per cent in Airtel, up from the current 35.4 per cent. Singtel’s effective holding in Airtel will drop to 29.7 per cent from 31.4 per cent while the Mittal family’s effective stake in the telco will rise to 25.6 per cent from 23.9 per cent.