Airtel considers a $1 billion fundraising effort to pay off Spectrum debt and considers issuing offshore notes

21 Nov 2023 , 12:46 PM

To pay off the majority of its outstanding debt associated with the spectrum it purchased at the 2015 auction, Bharti Airtel is considering raising about $1 billion (or Rs 8,330 crore) through various fundraising efforts, including the possible issuance of offshore bonds.

News reports stated that India’s second-largest telecom company is expected to meet with major international banks like Barclays and Citi later this month to determine the best fundraising strategy and price.

According to corporate authorities, Bharti Airtel, managed by Sunil Mittal, must pay off around Rs 12,000 crore in deferred liabilities (which also include 10% yearly interest) related to spectrum purchases made in the 2015 auction.

‘(Bharti Airtel) has been inquiring sporadically over the best strategy to generate money and whether or not to use the bond route…Whether the present dollar fund environment is sufficiently competitive in comparison to the domestic market will determine that choice, a senior banker with knowledge of the situation told ET. ‘In the past, sometimes they have opted for NCDs and tapped into mutual funds.’

Refinancing high-cost spectrum debt will improve cash flows, strengthen Airtel’s balance sheet, and reduce annual interest expenses even as the company rapidly extends 5G coverage and prepares to launch next-generation mobile broadband services across the country in the coming months, according to people with knowledge of the situation.

‘Airtel and a number of foreign banks will soon begin talking…For the intended offshore fundraise, both parties will aim to focus on the particular financial instrument and its pricing, according to one of the news reports.

According to a report by ET, Airtel might even use its other option, which is to use some of the money from its remaining rights issue, to pay off some of the debt it incurred from the 2015 spectrum auction. Since Airtel only received Rs 5,247 crore in the first tranche of its Rs 21,000-crore rights offer two years ago, it is eligible to make subsequent calls to access a portion of the remaining 75%.

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