Bharti Telecom, the holding company of Bharti Airtel, India's third-largest service provider, has this week sold 152 million shares in a block deal worth around INR85 billion ($1.12 billion).
The move reduces Bharti Telecom's stake in Airtel to 36% from 38.8% before the stake sale. The combined 58.9% promoter holding of the Sunil Mittal family and SingTel has now come down to 56%.
Bharti Telecom was able to get a good price for its stake sale because Airtel recently announced a 14% jump in average revenue per user in its recent quarterly results, which led to a surge in its share price.
Airtel had also issued a INR250 billion rights issue in March earlier this year. This month, Bharti Telecom raised INR35 billion ($462.7 million) through commercial paper, a short-term debt instrument. (See Airtel's latest results are a pleasant surprise and Record funds for Indian telcos could signal revival.)
The funds are likely to be used by Airtel to clear debt. Being debt-free will help the operator to improve its credit ratings and in turn attract funding. Bharti Telecom currently has a debt of around $1 billion, while Airtel's net debt stood at INR882.5 billion ($11.6 billion) at the end of March 2020, down from INR1 trillion about a year ago.
The Airtel move comes after arch-rival Reliance Jio raised more than $10 billion by selling stakes to several investors, including Facebook, Vista, General Atlantic, KKR and Silver Lake.
More funding for Airtel could help it to put up a stronger fight against Jio and also expand and transform its network for a better customer experience. It has recently awarded a gear contract worth $1 billion to Nokia as well as a telco cloud deal to IBM-Red Hat.
— Gagandeep Kaur, contributing editor, special to Light Reading