The Bharti group said they remained committed to the business and the capital raising was to retire debt.
Bharti Telecom, the promoter company of Bharti Airtel, on Tuesday raised Rs 8,433 crore ($1.15 billion) by offloading 2.75 per cent stake in the telecom major through secondary market trades.
The company said the sale saw more demand than the shares on offer, with investors across geographies placing bids.
“The stake sale was anchored by several existing and new shareholders and several marquee global mutual funds (MFs), sovereign wealth funds, multi-strategy funds and domestic institutional investors in sizable quantities,” the Bharti group said in a statement.
According to BSE data, Société Générale picked up 35.3 million shares at Rs 561.1 apiece, investing a total of Rs 1,981 crore. Sources said other buyers included Blackrock, Fidelity, Norges Bank, Axis MF, HDFC MF, Birla MF, and SBI MF.
Shares of Airtel fell 5.7 per cent to end at Rs 559 on the BSE.
Market players said the stock fell because of arbitrage bets and concerns over promoter dilution at a time when the stock has hit record highs. The floor price for the 150-million share sale was set at Rs 558 per share, a discount of six per cent over Airtel’s closing price of Rs 593 on Friday. Most of the shares, however, were sold at over Rs 562.
The Bharti group said it remained committed to the business and the capital raising was to retire debt.
“The sale proceeds will be utilised to fully repay debt at Bharti Telecom, which was raised primarily to finance the acquisition of Bharti Airtel
equity shares in the past. Bharti group and Singtel, as Bharti Airtel’s largest shareholders, remain committed to the business and the long-term prospects of Bharti Airtel.
In the last few years, the promoters have invested over Rs 21,000 crore ($3 billion) in Bharti Airtel
and stay fully committed to investing further in the business as may be required,” the statement said.
In May last year, Airtel had raised about Rs 25,000 crore through a rights issue. It was priced at Rs 220 per share. The Bharti group, including Singtel and Bharti Telecom, had subscribed to shares worth about Rs 11,800 crore in the offering.
Following Tuesday’s share sale, the Bharti group’s and Singtel’s holdings will decline to 56.23 per cent. Besides its stake in Bharti Telecom, Singtel has direct holding of 13.91 per cent in Airtel.
“The strong and wide response received from a diverse mix of investors across geographies, even during challenging global macro-economic conditions, clearly demonstrates the competitive strength and the long-term prospects of Bharti Airtel. With the proceeds, Bharti Telecom will become a zero debt company providing an even stronger financial flexibility and capacity to offer any additional shareholder support as may be desired by Bharti Airtel from time to time,” said Harjeet Kohli, group director at Bharti Enterprises.
JPMorgan India was the investment bank that handled the share sale.
Shares of Airtel have gained 22.4 per cent this year, outperforming the benchmark Sensex, which is down 26 per cent. Global index providers are set to increase Airtel’s weighting in their indices following the promoter dilution.
After a challenging period, the Street has turned bullish on the telecom sector. Past few years, investors had turned wary of investing in telecom stocks due to mounting debt and fall in profitability because of a price war triggered by the entry of Reliance Jio in 2016. With only Airtel, Jio and Vodafone Idea left with sizeable market share and most players opting for tariff increase, investors have once again fallen in love with the sector.
Also, telecom has been among the very few sectors which have seen an increase in business due to the Covid-19 lockdowns with increase in data usage as most of the workforce is operating from home.