Airtel Renounces First Refusal Rights for TCIL's Stake in Bharti Hexacom

15 Feb 2024 , 12:00 PM

According to experts, Bharti Airtel has waived off its right of first refusal (RoFR) to buy state-owned Telecommunications Consultants India Ltd’s 30% interest in Bharti Hexacom because it sees no immediate benefit in doing so.

Last month, Bharti Airtel subsidiary Bharti Hexacom submitted a draft offer document with the Securities and Exchange Board of India (Sebi) to sell a 20% interest in TCIL, allowing the government a partial exit. Following Bharti Hexacom’s initial public offering (IPO), TCIL’s ownership will fall to 10%, while parent firm Bharti Airtel will retain a 70% share in the subsidiary.

‘The management of Bharti stated that Airtel had the initial opportunity to acquire the government’s 30% stake in Bharti Hexacom through TCIL. However, they have currently chosen to forgo this right, as the telecom company does not perceive any value in acquiring the stake from the market after the listing of Bharti Hexacom,’ noted BofA Securities in a communication.

BofA also stated that Airtel’s management feels that a future Bharti Hexacom initial public offering (IPO), rather than any other way, will give price clarity, which is a crucial requirement of the government when it has to fully sell its investment in the business.

BofA attended an analyst meeting given by Bharti Hexacom on February 12 in preparation for the latter’s offering. 

The global brokerage said any prospective IPO of Bharti Hexacom has no impact on Airtel because the Sunil Mittal-led company is neither lowering its investment in the business nor raising funds, and a change in Hexacom’s owners would not affect any P&L item.

Bharti Hexacom operates mobile services in Rajasthan and the Northeast. Prominent figures within the industry anticipate that the government is likely to generate approximately ₹6,700 Crore from the forthcoming sale of a 20% stake in TCIL in the company.

TCIL is a state-owned telecom engineering and consultancy corporation with international operations, especially in the African and West Asian markets.

Bharti Hexacom does not own any fibre and rents it from Airtel at arms-length pricing. It, however, possesses spectrum and radio equipment. Hexacom also pays for brand and corporate overheads.

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