Bharti Airtel Ltd. (Airtel), an Indian telecom company, announced on Wednesday, January 15, 2020, that it was able to raise $3 billion through the sale of its shares and bonds. Airtel started raising its funds in order to clear its payment to the Indian Government which was due in about a week’s time. The telecom company had accumulated its funding from the policy so-called, qualified institutional placement (QIP) as well as the foreign currency convertible bond (FCCB).
Airtel’s Dues for Airwaves and License Fees
Following the entry of Reliance’s Jio Infocomm Ltd. (Jio) in the telecom business market, the Indian telecom companies including Vodafone Idea Ltd. (Voda Idea) and Airtel have been facing a harsh struggle against the fierce competition. Earlier in October 2019, the Supreme Court of India (SC) had announced that the Indian telecom operators owed a total amount around $13 billion of dues over the airwaves and license fees.
Despite several operators disputed the telecom regulator’s calculation of fees, the SC ordered to make the payment until January 24, 2020. The New Delhi-based telecom company, Airtel was ordered by the SC to pay $3 billion including the fees and taxes. The rival Voda Idea was also slapped with a $4 billion bill.
According to data compiled by Bloomberg, Airtel has collected $3 billion from its fundraising through two sources; $2 billion from the QIP placement and $1 billion from the issuance of convertible bonds. Raising $3 billion dollars via QIP and FCCB offering, Airtel commented that the funding was the largest ever QIP accumulated by a private sector issuer in India and the largest FCCB offerings in the last 12 years in India.
To raise the funding, Bharti Airtel made in a statement saying, “The company…will issue 32,35,95,505 equity shares of face value of ₹ 5 per equity share at a price of ₹ 445 which implies a discount of 1.57 percent on the SEBI (Securities and Exchange Board of India) determined floor price of ₹ 452.09 per equity share.”
Positive Response from Several Investors for Funds
Bharti Airtel officials made in the statement on Wednesday that the $3 billion via the QIP and FCCBs was “participated by diversified investors including the companies based on global long-only funds, sovereign wealth funds, domestic mutual funds, multi-strategy funds and insurance companies in sizable quantities.”
As BloombergQuint reported, “the long-only investors comprised 80 percent of the demand for the QIP and the FCCB offering of the company was multiple times oversubscribed with very strong demand from Asian and European funds.” The company revealed, “The FCCB was priced at a coupon of 1.5 percent per annum, yield-to-maturity of 2 percent per annum and a conversion premium of 20 percent above the final QIP price of ₹ 445.”
Harjeet Kohli, Group Director of Bharti Enterprises, stated that the FCCB offering received positive responses from the global as well as domestic investors. Kohli expressed that investors still believed in the company despite the existing volatile market environment and challenging global macro-economic conditions in the telecom business.
The company’s officials expressed, “This underlines Airtel’s growth-oriented financial performance and future growth potential of our business and the sector. We are delighted with the participation and continuing support of high-quality investors thereby ensuring further diversification of the shareholder base of Bharti Airtel.” Following the news, Airtel closed its share price at ₹ 467.10 per share on Wednesday which was a 0.50% lower than the previous closing.
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