Bharti Airtel offloads 5% equity to QFE, for Rs 6,796 crore

Bharti Airtel has today announced offloading of 5 percent equity to Qatar Foundation Endowment (QFE) for Rs 6,796 crore.

The investment will help Bharti to gain exposure to strong investor base in Middle East, in addition to South East Asia.

The company has entered into a binding agreement with Qatar Foundation Endowment under which Bharti will issue 199.87 million new shares to QFE representing a shareholding of 5 percent in the company, post issuance of the new shares.

As per the agreement, QFE will subscribe to 199.87 million new shares of Bharti at a price of Rs 340 per share amounting to a total consideration of $1.26 billion (Rs 6,796 crore). The investment will further strengthen the capital structure and provide further flexibility for the company to deliver on its growth strategy.

Commenting on the agreement, Sunil Bharti Mittal, chairman, Bharti Airtel said "I am delighted to welcome another high quality long-term institutional investor to our shareholder base. This strategic partnership with QFE demonstrates the confidence they have in the company and our strategy for growth. In addition, this agreement exemplifies further strengthening of the already deep economic and cultural relations between Qatar and India. We look forward to a long and fruitful partnership with QFE."

Speaking on the agreement, Rashid Al-Naimi, acing chief executive officer, QFE said "We are excited to be making a significant investment in one of the leading telecommunications companies in the world. As a long-term global investor, our shareholding gives us exposure to a high growth sector in key emerging markets. QFE looks forward to supporting Bharti in realising the full potential of this world class business."

Goldman Sachs acted as sole financial advisor to QFE for Bharti Airtel investment.

The shareholding break-up of Bharti Airtel as on 31st March, 2013 is promoter holding (45.75 percent), Pastel (15.57 percent), Indian
Continent Investment (7 percent), Viridan (0.22 percent) and public shareholding (31.45 percent).

Commenting on the development, Sachin Salgonkar, Goldman Sachs said, "If the company were to use the entire $1.26 bn proceeds to repay its debt, the company's overall debt would reduce from current Rs 729 bn to Rs 662 bn. This would help the company reach its targeted gearing of net debt/EBITDA of 2X. Based on the FY13A implied interest rate of 6 percent, this would lead to interest expense savings of Rs 4.3 bn/year (or 9 percent p.a.). Based on the increased share count and interest expense savings post the completion of the transaction, potential impact to its EPS would be marginal in FY14 and about 4 percent in FY15. Any potential reduction in its unhedged US$ debt would help the company reduce fluctuations in earnings led by forex expenses."