Bharti's surprise fundraising talk sends stock up 4%

Mumbai: Shares of Bharti Airtel gained more than 4% on Tuesday, a day after India’s second-ranked telco said it plans to consider raising funds via a preferential share issue to investors other than its promoter group.

There are reports that Amazon, Google or Microsoft could be a potential investor.

Airtel, Amazon, Google and Microsoft declined to comment.

The carrier’s latest fund raising decision took the market by surprise. According to brokerage firm Jefferies, it has “come as a surprise as there is no immediate need for capital”.

The company’s stock closed at Rs 711.90, up by 3.23% on the BSE on Tuesday.

Analysts have pointed out that Airtel has a healthy balance sheet and has recently prepaid spectrum liabilities worth Rs 15,500 crore. The preferential share issue call comes within months of its Rs 21,000-crore rights issue.

In a note, Jefferies said that a strategic investor, though, could strengthen Bharti's enterprise/digital offerings in particular.

The telco is in stiff competition with market leader Reliance Jio Infocomm (Jio) and Vodafone Idea besides the likes of Tata Communications to build its enterprise portfolio. “A partnership, potentially with a hyperscaler, could help scale its enterprise business further,” Jefferies said in its report.

According to a senior telecom analyst, Airtel could look at a major digital/tech player as a strategic and financial investor. “A global digital company or technology major will bring in the expertise when Airtel is competing with a Jio Platform, which has seen similar strategic investors,” said the Mumbai-based analyst who did not want to be named.

Jio Platforms, the digital arm of Jio, raised Rs 1,52,055.45 crore from 14 investors, including the likes of Meta (then Facebook), Google, Intel, Qualcomm, KKR, General Atlantic, Mubadala and PIF.

However, Jefferies has cautioned that the equity capital raise could be an “overhang on Bharti's stock price in the near term, particularly if the size of the issue is large”.

Over the recent past, Bharti Airtel has invested Rs 6,000 crore in acquiring a 20% stake in DTH business from Warburg Pincus and a 5% stake in Indus Towers from Providence Partners et al.

“Any potential increase in stake in Indus Towers funded through an equity issuance will be viewed negatively as it could potentially lead to a large dilution,” noted the analysts at the brokerage firm.

But the recent tariff hikes should help Bharti deliver a 20% year-on-year growth in consolidated revenues in FY23—its highest in a decade—it added.

Monday, the Sunil Mittal-led carrier said that its board will meet on January 28 to consider a proposal for “issuance of equity shares through preferential issue (other than to promoter/promoter group), subject to all such regulatory/statutory approvals as may be required, including the approval of shareholders of the company”.

At present, Airtel’s promoter group—the Mittal family and SingTel—hold 55.93% of the telco and the rest is held by the public. The Mittal family directly and indirectly owns around 24.13%, while SingTel holds 31.72%.

The fund raising also comes at a time when the telco along with Jio and Vodafone Idea will be eyeing the 5G auctions this year. All three are betting on the next generation of technology to be the game changer.