Sunil Bharti Mittal-led telecom major Bharti Airtel has kicked off a mega $2 billion (roughly Rs 14,500 crore) fundraising exercise and shortlisted merchant banks Axis Capital, JP Morgan and Citi for FY20's biggest qualified institutional placement (QIP) yet, sources with knowledge of the matter told Moneycontrol.
Earlier in the fiscal, Axis Bank and Bajaj Finance had raised Rs 12,500 crores and Rs 8,500 crores, respectively via the QIP route.
"Axis Capital has been engaged as the left lead book-running manager for the QIP. JP Morgan and Citi are also on board. More merchant bankers are likely to be appointed at a later stage prior to the launch," a source said
"Law firm AZB & Partners has been engaged as the counsel for the issuer company i.e Bharti Airtel. The roadshows will begin shortly, maybe as early as this week and the QIP is likely to be launched in early January 2020," added a second source.
Last week, Bharti Airtel's board had given the nod to raise a combined $3 bn (around Rs 21,500 crores) through a mix of equity and debt.
The funds will be used to pay Bharti Airtel's dues to the Department of Telecommunication (DoT). The dues were triggered by an adverse ruling by the Supreme Court that rejected the definition of adjusted gross revenue (AGR) proposed by telcos and excluded revenue from non-core telecom operations like rent, dividend, and interest income.
The additional provisions required to pay these dues led Bharti Airtel to post a whopping Rs 23,045 crore loss in Q2 from a net profit of Rs 118 crore the year ago. Vodafone Idea also reported a net loss of Rs 50,922 crore for the same quarter.
To provide some respite from the mounting losses, the government on November 20 granted a two-year moratorium on the repayment of the dues. Finance Minister Nirmala Sitharaman announced that the years of deferment of payments will be spectrum auctions for years 2020 to 2021 and 2021 to 2022.
"These deferred amounts will be equally spread over the remaining installments to be paid by the TSPs without any increase in the existing time period specified for making the installment payment," said Sitharaman.
However, telecom firms Bharti Airtel and Vodafone Idea have sought further relief from the government. Recently, Vodafone Idea Chairman Kumar Mangalam Birla said that his company would have to shut shop if relief doesn't come through.
According to brokerage firm CLSA, AGR risks for Bharti Airtel can likely lead to payments of Rs 34,300 crore or $4.7 billion, of which around 75 percent is interest and penalties.
Morgan Stanley has maintained an overweight rating on Bharti Airtel saying the recent tariff hike by the company is a step in the right direction. "FY21 ARPU will likely see substantial improvement," the brokerage added.
Recently, all three major private telcos, Bharti Airtel, Reliance Jio and Vodafone Idea also hiked their respective tariffs leading to a rally in stock prices. On December 3, Bharti Airtel increased the charges of its prepaid voice and data services by up to 47 percent. Reliance Jio and Vodafone Idea also raised charges by up to 40-42 percent.
"With pricing sanity back in the telecom sector, this is a good time for Bharti Airtel to raise money," added another source. The company's share price has surged by 20 percent in a month, between November 6 and December 6. During the same period, rival Vodafone Idea's share price has surged by 79 percent.
Bharti Airtel, Citi, and JP Morgan declined to comment in response to an email query and Moneycontrol is awaiting a response from Axis Capital and AZB & Partners.
(Source: Moneycontrol.com) Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.