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Bharti up on deal closing
Wed, 9 Jun 11:30 am

After starting on a positive note, the Indian indices have been facing alternate bouts of buying and selling in the early hours today. Stocks from oil and gas and PSU space are seeing buying interest while profit booking is seen in stocks from the IT and FMCG space.

BSE-Sensex is trading up by 45 points while NSE-Nifty is trading marginally in the green with a 17 point gain. BSE-Midcap index and BSE-Smallcap index are up by 0.7% and 0.6% respectively. The rupee is trading at 47.00 to the US dollar.

Telecom major Bharti Airtel is trading firm on the back of it becoming the 5th largest telecom operator in the world. It completed a US $7.9 bn cash payment to the Kuwait based operator Zain. Overall the deal costs US$ 10.7 bn of which US$ 9 bn is payable in cash and US$ 1.7 bn is the debt Bharti is taking over. The good part is that the money has been sourced at an extremely attractive interest rate of 1.9% through external commercial borrowings (ECBs).

The combined business will have 180 m subscribers in 18 countries with annual revenue of US$ 12.4 bn. Tariffs in Africa are around 15-20 times that of India. Bharti is going to try and make the tariffs more affordable for the African public based on its low-cost India model. Lower tariffs will help increase penetration levels in the poorer nations. Another positive in Africa is that much-needed spectrum is abundant and easily available which will make network rollout easier and faster in these countries.

In order to take care of the financing needs of the infrastructure sector the government plans to set up an infrastructure debt fund of Rs 500 bn. The fund would be set up as a trust and regulated by SEBI. Apart from this other sources of financing include multi lateral agencies such as International Finance Corporation and Asian Development Bank.

The primary reason to set up the fund was to create a separate distinct legal entity to provide long term financing requirement for the infrastructure companies. The debt fund is likely to be set up by issuing bonds upto Rs 200 bn to various domestic insurance and pension funds in multiple tranches.

Setting up a distinct entity exclusively for lending to infrastructure sector will provide the much needed financing fillip to infrastructure sector which has been starving for low cost funds. Companies like IVRCL, Nagarjuna Construction and Hindustan Construction are the immediate beneficiaries as now they will be able to borrow for longer tenure at low cost without having to roll over the high cost short term debt.

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Feb 20, 2018 11:07 AM