Airtel’s fund-raising plans entail rights issuance of up to Rs 25,000 crore and Perpetual Bond with equity credit of up to Rs 7,000 crore. Assuming the Rs 25,000 crore rights issue is concluded and all proceeds are used to pay down bank debt at the Indian operations immediately, the consolidated adjusted debt/EBITDA (Earnings before interest, tax, depreciation and amortisation) would fall, Moody’s said. “That said, we believe there are likely timing differences with respect to actual debt reduction particularly considering our expectations for capex and profitability of the Indian operations. As a result, we believe some of the debt reduction may only be temporary as bank debt may be re-borrowed to provide additional liquidity amid ongoing competition in the Indian mobile market,” it said. The Moody’s statement said, still, it expects a significant portion of proceeds from the rights issue to be used to lower debt, strengthening Airtel’s balance sheet and providing the company with greater financial and operational flexibility for its Indian operations. “But Bharti’s ratings are unlikely to change in the near-term as we expect leverage will remain elevated while profitability and cash flow of the company’s core Indian mobile segment remain under pressure,” it said. On the company’s proposal for a perpetual bond with conditions allowing for full accounting equity credit, it said that according to its methodology, any instrument issued by a speculative-grade company with a debt claim is treated as 100% debt in calculating a company’s adjusted financial metrics. “We will need to evaluate the amount and terms and conditions of the perpetual bond when disclosed,” it added.
