Bharti Telecom to buy 3.3% stake in Airtel from Singtel for ₹12,895 cr

Bharti Telecom Limited (BTL), the promoter of Airtel and a joint venture between Bharti Enterprises and Singapore-based Singtel, will further strengthen its shareholding in telecom major Bharti Airtel by acquiring a 3.33% stake from Singtel and its affiliates for about SGD 2.25 billion ($1.61 billion or ₹12,895 crore). After this stake purchase, the direct shareholding of Singtel and the Bharti family in Airtel will stand at 10% and 6%, respectively.

Bharti Telecom (BTL) is jointly owned by the Bharti family and Singtel.

After this transaction, the Singtel Group will own an effective stake of 29.7%, which is estimated to be worth S$22 billion, from 31.4% earlier in Airtel. This comprises a 19.2% indirect stake through Bharti Telecom and a 10.5% direct stake.

Both the companies have decided to work towards equalising their stake in Airtel over a period of time, says an exchange filing by Bharti Airtel, adding that BTL will calibrate and spread such acquisitions to maintain a comfortable level of leverage. The stake sale will be executed anytime before November 23, 2022.

"Accordingly, Singtel and its affiliates have entered into an agreement to transfer 3.33% shares to BTL for an aggregate amount of approx. SGD 2.25 billion, leaving direct shareholding of Singtel and Bharti in Airtel at 10% and 6%, respectively. The acquisition is to be completed over a period of 90 days," says the company.

Bharti Enterprises chairman Sunil Mittal says after this inter-se transaction, Bharti Telecom will remain the principal vehicle to hold controlling shares in Airtel. "Bharti Enterprises and Singtel have agreed to work towards equalising their effective stake in Airtel over time,” he adds.

For Singtel, the deal will unlock approximately S$2.25 billion as part of the Singtel Group’s capital recycling strategy. Singtel is Asia's leading communications tech major that has a presence in Asia, Australia and Africa and reaches mobile customers in 21 countries.

"The transaction is expected to crystallise an estimated S$0.6 billion net gain on divestment for Singtel. This will follow a number of recent capital management initiatives to rebalance and optimise Singtel’s associates' portfolio, including an increase in stake in Intouch Holdings, the parent company of Singtel’s regional associate AIS, and partial divestment of Airtel Africa," Singtel says in a statement.

According to Arthur Lang, Singtel's group chief financial officer says the value of its stakes in regional associates has risen substantially over the years but has not been properly reflected in its share price.

"The sale in Airtel will be its first-ever and will address this gap by illuminating the sizeable value of our holdings in Airtel. It is also part of our capital management approach to take monetisation opportunities that allow us to increase our return on invested capital and enhance total shareholder returns."

With this transaction, the company will raise over S$2 billion, which will help it meet the needs for 5G and growth initiatives.

Apart from India, Airtel runs operations across 16 countries in Africa. The company will launch 5G services nationwide in India soon, starting with key cities and further strengthening its leadership in the B2B market.

The Bharti Airtel stock was up 0.85% in the opening trade at Rs 745. The stock is in a bullish range, trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. However, the telecom major stock has underperformed the sector by 0.3% today. The stock has been gaining for the last three days and has risen 2.38% in the period.