At the same time, Moody's has assigned a Ba1 corporate family rating (CFR) to Bharti and withdrawn the company's Baa3 issuer rating, the rating agency said in a press release.
Moody’s Investors Service has downgraded the senior unsecured rating of Bharti Airtel to 'Ba1' from 'Baa3' over concerns about improvement in the company's profitability, cash flow situation and debt. It has also assigned a 'Ba1' corporate family rating to Bharti Airtel and has withdrawn the company's Baa3 issuer rating.
The ratings outlook is negative.
"The downgrade reflects uncertainty as to whether or not the company's profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telco market ," noted Annalisa DiChiara, vice president and senior credit officer, Moody's.
The rating agency also lowered rating of the backed senior unsecured notes issued by Bharti Airtel unit Bharti Airtel Int'l (Netherlands) B.V.
On January 31, Airtel reported a 72 percent drop in consolidated net income for the three months ended December 2018 at about Rs 86 crore, amid market turbulence triggered by cut-throat competition in India business.
Bharti Airtel India revenue in the reported quarter declined by 2.3 percent year on year to Rs 14,768 crore on an underlying basis.
Moody's said the Ba1 CFR indicates the company's solid market position in the high growth Indian mobile market, and considers the telecom operator's efforts to reduce debt levels through asset sales and the secondary IPO of its African unit.
"A significant recovery in cash flow from the core Indian mobile segment is needed to strengthen the company's credit quality and support greater financial flexibility," adds DiChiara, also Moody's lead analyst for Bharti.
Moody’s said, Airtel’s rating outlook could be stabilised if it strengthens its credit portfolio, with a stabilization of its core Indian mobile and non-mobile services. It added that the negative outlook reflects that expected asset sales are subject to market timing and/or require regulatory and shareholder approvals, therefore raising execution risks with respect to the amount of proceeds ultimately raised, as well as the timing of their completion.
At 9.35 AM, Bharti Airtel shares traded 3.41 percent down at Rs 296.15 per share on the BSE.