International rating agency S&P maintained Bharti Airtel’s credit rating of “BBB-“, and upgraded outlook to stable from negative, indicating the company’s improved financial status and ability to pay back debt.
“The stable outlook reflects our view that Airtel will actively manage its leverage such that its ratio of funds from operations (FFO) to debt will stay well above 20% on a sustained basis while maintaining its competitive position,” S&P Global said.
The Global rating agency said that Bharti Airtel's Indian mobile segment is likely to continue growing at a healthy rate, but there is the absence of across-the-board tariff hikes and is taking place at a slower pace than in fiscal 2021.
The board of the company last month approved a proposal to raise upto INR 21,000 crore (USD 2.9bn) through the rights issue. Bharti Airtel Chairman Sunil Mittal had recently said the company's INR 21,000 crore fundraising will enable the firm to shift from "business as usual" to a higher gear to tap opportunities, improve leverage position, and chase profitable growth by speeding investments in 5G, fibre and data centres.
The ratings expect Airtel’s upcoming mega-funds raise via rights issue to alleviate the likely impact from upcoming 5G spectrum liabilities, which is necessary for the telco’s competitiveness.
“We believe the rights issue aims to preemptively build financial capacity for Airtel ahead of upcoming 5G investments, given the absence of other immediate funding needs,” it added.
S&P said Airtel’s “improving operating fundamentals should improve its margins and Ebitda” and mitigate the potential effect on leverage from expected 5G spectrum investments. It added that Airtel’s upcoming rights issue also mitigates this risk.