Ember and the Mittal family its shareholders in Bharti Telecoma promoter company of Bharti Airtel† In addition, both directly own shares in Bharti airtel†
ET was the first to report on May 26 that Singtel had started talks with Bharti airtel chairman Sunil Mittal to sell a small portion of his stake in Indian telco to the Mittal family as part of its portfolio management strategy. The long-standing Singaporean partner is keen to make some profit by selling Bharti shares and reallocating some of the capital into new investment opportunities.
Sources at both companies said the Mittals were initially keen to complete the share acquisition by early June. They were also in active dialogue with banks such as DBS, Standard Chartered, Citi, JP Morgan, MUFG and Goldman Sachs and had even set up $1.5 billion in credit lines – either as rupee debt or through the Foreign Portfolio Investor (FPI) route. – for the acquisition of shares.
“They certainly haven’t given up, but it has been pushed out,” said one director. “And one of the most important factors is the mismatch in the valuation. Bharti stock has been quite volatile in recent months. †
In May the Airtel stock was 33% higher than the year before, although it is below the high of Rs 781.80, which it reached on November 24. In the past three months, it is down 12%. The stock ended Wednesday at Rs 693.95, up 1.41% from the previous day.
People familiar with the matter said the delay in closing the deal and the impending 5G spectrum auction could mean the transaction is based on the strategy the partners are pursuing during the bidding process and how much money needs to be raised to to acquire the ether, they said. †
Bharti and Singtel did not respond to questions.
Valuable possession
Singtel has been a shareholder of Bharti Airtel since 2000. The Mittal and Singtel family own 50.56% and 49.44% respectively in Bharti Telecom, which in turn owns a 35.85% stake in Bharti Airtel. In addition, Singtel and the Mittal family directly own 14% and 6.04% in the telco through investment companies. The Mittal family’s effective shareholding in Bharti Airtel stands at 24.13% while that of Singtel stands at 31.72%.
The plan was that the Mittals would acquire about 4% of what Singtel owns in Bharti Airtel, or a 2% sale in Bharti Telecom, as a mutual transfer of shares between promoters. Selling Bharti Airtel shares worth $1.5 billion would have reduced Singtel’s stake to less than 28.6%, while divesting shares worth $2 billion would have reduced it to 27.60% , said knowledgeable people.
In late May, Singtel said underlying net profit for fiscal year 2022 grew 11% year-on-year to S$1.92 billion, mainly due to the turnaround of associate company Bharti Airtel. It recorded a nearly 164% year-over-year jump in consolidated net profit to Rs 2,007.8 crore in the March quarter, its sixth consecutive quarter in the black.
Singtel group CEO Yuen Kuan Moon said in a May 27 statement that its regional partner’s pre-tax contributions increased 21% to S$2.07 billion “driven by Airtel’s double-digit increases in revenue and EBITDA.” , as it kicked off a solid recovery in India and saw continued growth in its African operation.”
In a previous statement to ET, a spokesperson for Singtel had said: “We have been strategic investors in Airtel for decades and it remains a core investment in our international portfolio. We have not hired a bank to investigate such a sale and we will not comment on market speculation. We abide by the market disclosure rules to report all material transactions.”
5G auctions this month
With staggered payouts for spectrum purchases under the new relaxed payment regime offered by the government, analysts expect an initial outlay for buying 5G and other ether to be less than Rs 5,000 crore for operators such as Bharti Airtel and Reliance Jio Infocomm. Motilal Oswal’s pegs the total expenses of Bharti Airtel at Rs 15,000 crore ($2 billion) to Rs 20,000 crore ($2.5 billion) in the upcoming auction. Experts expect Airtel to attract shares – rights or preferential allocations – and debt as it has in the past. The cinder stake sales, many expect, will likely happen at that time.
Last October, Airtel had raised about Rs 5,247 crore as the first tranche of its Rs 21,000 crore rights offering. The remaining Rs 15,753 crore will be raised after the 5G auctions.
Analysts estimate that Airtel’s rights offering requires the Mittal family’s promoters, Singtel and Bharti Enterprises, to contribute approximately Rs 6,661 crore and Rs 5,067 crore, respectively. If Singtel does not fully subscribe to its quota of “rights” and its share is transferred and subscribed by Bharti, then the shareholding will also be recalibrated or adjusted, with the same result in favor of the Mittal family.
In 2019, Singtel bought $525 million worth of stock in Airtel, which was in the midst of a fundraiser to increase its balance sheet, amid the need to make regulatory payments and invest in its network to better compete with rival Reliance jio.
Earlier this year, Google agreed to invest $700 million (Rs 5,224.4 crore) from its $10 billion Google for India Digitalization Fund to purchase a 1.28% stake in Bharti Airtel through a preferred issue of shares at Rs 734 each. The remaining $300 million will be used for multiple commercial deals over the next five years, such as Bharti Airtel’s plans to make smartphones more affordable and get about 350 million feature phone users to upgrade to devices that support online access.