Bharti Airtel Board Approves Rs 21,000 Crore Rights Issue

The board of Bharti Airtel on Sunday approved fund-raising to the tune of Rs 21,000 crore, mainly to make payments towards adjusted gross revenue (AGR)-related liabilities due in 2021-22 (FY22).

The board approved the issuance of equity shares of a face value of Rs 5 each of the company on a rights basis to eligible equity shareholders. The issue size is up to Rs 21,000 crore, said an official statement by Airtel.

The rights issue is priced at Rs 535 per fully paid-up equity share, including a premium of Rs 530. This translates to a discount of 10 per cent to the stock’s closing price on Friday (Rs 593.95 at the BSE).

The rights entitlement ratio ent­ails one equity share for every 14 equity shares held by eligible shareholders as on the record date, Airtel stated. As far as terms of payment of the issue price are concerned, 25 per cent is to be paid on application, balance in two more additional calls as may be decided by the board or committee of the board, based on the company’s requirements within an overall time horizon of 36 months.

The company moved Supreme Court (SC) last week, with a review petition on the AGR issue. Airtel has sought correction of arithmetical errors in calculations linked to AGR. On July 23, the SC dismissed the petitions of Vodafone Idea (Vi) and Airtel, seeking correction of alleged errors in calculating dues linked to AGR.

The Department of Telecommunications (DoT) had arrived at around Rs 58,000 crore as total AGR liability for Vi. DoT’s calculation was around Rs 28,700 crore more than Vi’s. Airtel, too, had contested the DoT calculation of Rs 43,980 crore total AGR liability for the telco.

Airtel said it had to pay Rs 13,000 crore more, having already made a payment of Rs 18,000 crore. The DoT's calculation exceeded Airtel’s by around Rs 12,980 crore.

The SC in October 2019 had delivered the verdict on the AGR issue for calculating government dues of telecom companies, such as licence fee and spectrum usage charges. After the top court had rejected pleas by Vi, Airtel and Tata Teleservices sought review of the judgment, further widening the definition of AGR by including non-telecom revenues, the DoT had said in March, moving a plea seeking staggered payment over 20 years.

Airtel reported a net profit of Rs 283.5 crore in the first quarter ended June of FY22. This was much lower than the consensus estimates, which had pegged the same at Rs 604 crore. The company had reported a loss of Rs 15,933 crore in the year-ago quarter on account of one-time provision for dues related to AGR.

The June quarter profit was aided by the sale of tower assets in Africa for $175 million (or Rs 1,279.6 crore). On a sequential basis, the reported profit was down 63 per cent. Further the board has constituted a special committee of directors to decide the other terms and conditions of the issue, including issue period and record date.

The promoter and promoter group of the company will collectively subscribe to the full extent of their aggregate rights entitlement. In addition, they will subscribe to any unsubscribed shares in the Issue.

The latest fund raise proposal by Airtel, which is also among the biggest rights issues from India Inc, follows Vodafone Idea’s rights offer of Rs 25,000 crore in April 2019, Airtel’s previous rights offer of about Rs 25,000 crore in May 2019 and last year’s Rs 53,125-crore rights issue of Reliance Industries.

Bharti Airtel’s previous rights offer of Rs 25,000 crore was priced at Rs 220 per share, when its share price was hovering around Rs 318 levels.

Considering the proposed amount of Rs 21,000 crore and the issue price of Rs 535 per share, the company would now be issuing 392.5 million fresh shares. This would translate into a dilution of 7.15 per cent in its equity capital given the outstanding shares of 5,492 million as on June 30, 2021.