Bharti Airtel dips 5% as Moody's places co's rating on review for downgrade

Shares of telecom major Bharti Airtel on Friday dropped as much as 5.21 per cent to Rs 290 apiece on BSE after Moody's Investors Service placed the company's rating on review for downgrade, following low levels of profitability and expectation of weak cash flow.

Moody's has placed on review for downgrade the 'Baa3' issuer and senior unsecured rating of Bharti Airtel and the ratings on the backed senior unsecured notes issued by Bharti's wholly-owned subsidiary, Bharti Airtel International (Netherlands) B V, PTI reported quoting the US-based agency as saying. READ MORE

"The review for downgrade is primarily driven by our expectation that Bharti's cash flow generation will remain weak and leverage elevated," Moody's VP and Senior Credit Officer Annalisa DiChiara said. "Because we believe a more rational competitive environment in India's telecommunications market is unlikely over the next 12-18 months, the review also reflects uncertainty as to whether the company's profitability, cash flow situation and debt levels can improve sustainably and materially over the same period," said  DiChiara, who is also Moody's lead analyst for Bharti.

'Baa3' is the lowest investment-grade bond ratings, and any downgrade would put the rating in speculative grade.

The telecom major has been under pressure this calendar year with the stock price falling 42 per cent to Rs 305.05 as of Tuesday's close from Rs 529.40 as on December 29, 2017, shows ACE Equity data. In comparison, the benchmark index Sensex has risen nearly 3 per cent during the same window. 

The company had reported a 65.4 per cent drop in consolidated net profit at Rs 1.19 billion for the second quarter ended September 2018. Its net profit stood at Rs 3.43 billion in the same period of the previous year, according to a company statement. Total revenue came in at Rs 204.22 billion for the September quarter, which was 6.2 per cent lower than Rs 217.77 billion notched in the year-ago period.

At 09:35 am, shares of the company were trading at Rs 299 apiece on BSE, down 2.29 per cent. 

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