The board of Bharti Airtel Ltd has approved the proposal to raise $3 billion dollars. The funds will be raised through various modes including Qualified Institution Placement (QIPs), stake sale and debt papers. As per the Company’s exchange filing on Wednesday, out of the $3 billion, $2 billion will be raised via equity and the remaining $1 billion will be through debt – debentures and bonds. The board also authorized the Special Committee of Directors for taking necessary steps for implementing the fundraising proposal.
The company is faced with AGR dues amounting to Rs. 43,000 Cr. to the government. The company is need of funds to clear its statutory dues apart from debt refinancing. The company must repay about Rs 34,260 crore by January 2020. With the present round of fundraise, the net debt of Bharti Airtel, would stand at around Rs. 95,300 Cr.
Airtel and other telecom companies in India took a hit on profitability post the entry of Reliance Jio in September 2016 with its free services, leading to a price war. What followed was aggressive discounting by the incumbent operators, including Airtel, with an effort to retain the customers. Airtel has been able to better control its churn as compared to others; however, the discounting and price war has taken a toll on the company’s finances.
Added, to this is the statutory dues payable to the government. Earlier, in October, the Supreme Court had ruled that telecom operators would need to consider revenue from non-core operations to compute levies. This decision has led to a demand in penalty and interest on the unpaid dues from the telecom operators.
Airtel’s has also recently announced a 15-50 % hike in its prepaid tariffs, and had earlier revised its postpaid, and broad band tariffs. The company has also stopped discounting to prevent further erosion. The company has maintained a strategy of focusing on its premium customers and has been bundling value added services at higher price points, instead of discounting. The present increase in prepaid tariffs will also help the company generate some additional cash.
HrNxt.com Newsdesk has researchers and writers with an excellent domain knowledge about the talent ecosystem, and the business environment. The team keeps a tab on the latest happenings in the ecosystem to bring most relevant news and insights for our readers. You can connect with our newsdesk at newsdesk@hrnxt.com.