Comments
Motilal Oswal
Bharti Airtel (Buy)
CMP: ₹307.05
Target: ₹380
Bharti Airtel’s board has approved an ₹32,000 crore fund raise, which includes a rights issue of ₹25,000 crore and perpetual bonds with equity credit of ₹7,000 crore (foreign denominated).
Issue price of ₹220/share implies an issuance of 1,134 million rights shares, which would result in 22 per cent post equity dilution.
The fund raise is likely to bring down net debt/EBITDA sharply to 3.5x (FY19), as against the current estimate of 4.5x. Additionally, the plans of Africa IPO and Bharti Infratel stake sale will help raise ₹40,000 crore, which should reduce its net debt to ₹47,500 crore (net debt to EBITDA of 1.6x) by FY21.
Moreover, we believe that capex intensity has peaked out, which should reduce its annual cash burn from ₹16,900 crore in FY19 to positive FCF of about ₹4,300 crore in FY21, thus restricting the increase in net debt.
In our view, despite the steep dilution, the fund raising plan is a welcome positive which will allow Bharti to be self-sufficient and manage operations without any ARPU increase. Maintain ‘Buy’ with a target price of ₹380.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.