Airtel’s deleveraging measures crucial to ease ratings pressure: S&P Global
The company is committed to maintaining an investment-grade rating for which it may take strategic steps towards deleveraging.
By ET Bureau |
NEW DELHI: Sunil Mittal-owned Bharti Airtel’s potential deleveraging measures are crucial for stabilizing the rating at the current level (BBB-), S&P Global Ratings said in a statement on Friday.
In S&P’s view, the company is committed to maintaining an investment-grade rating for which it may take strategic steps towards deleveraging.
The ratings and research firm further said that the higher capital spending and depreciation of the Indian rupee partly offset the benefits of a recent US$1.5 billion equity infusion in Airtel's African operations.
Through a minority stake sale in African operations, the company raised additional equity of US$200 million which should further help deleveraging.
The operating performance of Airtel's Indian mobile services is showing signs of bottoming out, S&P said. The slowdown in its quarterly revenues eased to negative 0.6%.
Airtel’s reported net debt remained higher, at Rs 1.06 trillion, compared to Rs 0.95 trillion as of March 31, 2018.
According to S&P, Airtel with its new minimum recharge requirements, renewed focus on high ARPU customers, and a likely tapering of capital spending may be able to increase its operating cash flows over the next 12 months.
Furthermore, this could help the company take off some of the pressure on its leverage.
A sharp recovery in operating performance isn’t expected from Airtel owing to the competitive environment which is likely to remain intense. But Airtel’s other businesses, including African operations, will continue to support its credit profile, the ratings firm believes.
Airtel's current leverage of about 17% remains below S&P’s downgrade trigger of 20% for the rating. “A sizable debt reduction over the next three months would be key to stabilising the rating at the current level,” S&P stated.
The telco has formed a special committee of directors to evaluate various options to strengthen its capital structure and balance sheet.
The company's operating performance for the third quarter was slightly lower than S&P’s expectations, continuing the downward pressure on the rating.
In S&P’s view, the company is committed to maintaining an investment-grade rating for which it may take strategic steps towards deleveraging.
The ratings and research firm further said that the higher capital spending and depreciation of the Indian rupee partly offset the benefits of a recent US$1.5 billion equity infusion in Airtel's African operations.
Through a minority stake sale in African operations, the company raised additional equity of US$200 million which should further help deleveraging.
The operating performance of Airtel's Indian mobile services is showing signs of bottoming out, S&P said. The slowdown in its quarterly revenues eased to negative 0.6%.
Airtel’s reported net debt remained higher, at Rs 1.06 trillion, compared to Rs 0.95 trillion as of March 31, 2018.
ADVERTISEMENT
According to S&P, Airtel with its new minimum recharge requirements, renewed focus on high ARPU customers, and a likely tapering of capital spending may be able to increase its operating cash flows over the next 12 months.
Furthermore, this could help the company take off some of the pressure on its leverage.
A sharp recovery in operating performance isn’t expected from Airtel owing to the competitive environment which is likely to remain intense. But Airtel’s other businesses, including African operations, will continue to support its credit profile, the ratings firm believes.
Airtel's current leverage of about 17% remains below S&P’s downgrade trigger of 20% for the rating. “A sizable debt reduction over the next three months would be key to stabilising the rating at the current level,” S&P stated.
ADVERTISEMENT
The telco has formed a special committee of directors to evaluate various options to strengthen its capital structure and balance sheet.
The company's operating performance for the third quarter was slightly lower than S&P’s expectations, continuing the downward pressure on the rating.
ADVERTISEMENT
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
