The rating headroom remains limited despite the sizable equity infusion, it noted.
The board of Airtel last week approved fund-raising plans of up to Rs 32,000 crore through a combination of rights issue and bonds -- a move that will help the company take on market competition intensified by Reliance Jio, and cut debt.
The net debt of Bharti Airtel at the end of the third quarter of 2018-19 stood at Rs 1.06 lakh crore.
Airtel's fund-raising plans entail rights issuance of up to Rs 25,000 crore and Perpetual Bond with equity credit of up to Rs 7,000 crore (about USD 1 billion).
"The terms of Bharti's proposed USD 1 billion perpetual bonds remain unknown. We will assess the impact of those bonds on the company's capital structure and leverage at the time of their issuance," S&P Global Ratings' credit analyst Ashutosh Sharma said.
The analyst said that Bharti's higher capital expenditures over the past few years have weighed on its debt capacity.
However, the company may complete its 4G-rollout over the next two to three quarters, which could mean a sizable reduction in its capital spending.
"The Indian telecommunications market is showing signs of stabilizing, although it remains competitive. We think the negative growth that was spurred by price competition in the Indian telecommunications industry might be behind us, given that tariffs seem to have bottomed out," Sharma said.
Another credit rating agency Moody's Investor Service had come out with different perspective on the proposed rights issue.
Moody's said that the Airtel's proposed rights issue is "credit positive" as it will enable the company to pare debt and improve liquidity.
The Moody's statement said it still expects a significant portion of proceeds from the rights issue to be used to lower debt, strengthening Airtel's balance sheet and providing the company with greater financial and operational flexibility for its Indian operations.
"But Bharti's ratings are unlikely to change in the near-term as we expect leverage will remain elevated while profitability and cash flow of the company's core Indian mobile segment remain under pressure," it said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.