industry

Singtel to raise holding in Bharti Telecom beyond 50%


NEW DELHI: Singtel is likely to raise its stake in Bharti Telecom, the single largest shareholder in Bharti Airtel, to beyond 50%. The move will convert the holding company into a foreign-owned entity and, consequently, take overseas ownership in the mobile operator to over 85%.

At present, Bharti Telecom’s 41% equity stake in Bharti Airtel is classified as ‘domestic’ shareholding as it is majority-owned by the Sunil Mittal family (52% stake).

Even a small rise in the shareholding of Singtel, which currently owns 48% in Bharti Telecom, will result in a reclassification of Bharti Telecom as a ‘foreign’ investor since it will then be majority-owned by the Singapore company.

After this reclassification, Bharti Telecom’s entire 41% stake in Bharti Airtel will be considered foreign equity. As a result, foreign shareholding in Airtel, which currently stands at 43%, could rise to 85.07%. To make proposed changes compliant with FDI norms, Bharti Airtel last month sought government nod to increase foreign shareholding to 100%.

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In Order to Reduce Debt

Existing rules allow 49% foreign investment under the automatic route, and anything between 50% and 100% needs to be cleared by the government.

A Bharti Group spokesperson told ET that in order to reduce some debt, Bharti Telecom planned to seek investments from its promoter entities and Singtel. “Even a marginal increase in foreign equity would take the foreign investment in Bharti Telecom above 50%. Once that happens, Bharti Telecom’s entire stake in Bharti Airtel will automatically be considered as foreign investment. Consequently, foreign investment in Bharti Airtel can touch 85.07%, necessitating the application for increase in foreign investment,” he said.

The company had sought approval for 100% FDI to keep further headroom for investments by foreign institutional investors and foreign portfolio investors, added the spokesperson.

Currently, Singtel — directly, and indirectly through Bharti Telecom — owns over 35% in Airtel, while Mittal family’s effective shareholding is at around 27%. Mittals’ holding is expected to remain at over 26% after the expected overseas fund infusion in Bharti Telecom, said sources.

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The Bharti Group spokesperson declined to disclose the current debt on the books of Bharti Telecom, or the amount it plans to retire. Sources said the company had a debt of about Rs 4,500 crore as of March 31, 2019. Since then, it has raised over Rs 3,000 crore through bond sales to invest in Bharti Airtel’s Rs 25,000-crore rights issue.

Airtel shares closed 0.7% lower at Rs 365.75 on the BSE on Wednesday.

The change in Bharti Airtel’s ownership classification comes at a time when the telco is seeing initial signs of a revival with sequential growth in revenue and average revenue per user.





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