A difference over valuations is holding back the proposed $1.5-2 billion purchase of shares in by founder Sunil Mittal‘s family from Singapore Telecommunications Ltd (Singtel), said people with knowledge of the matter.
Singtel and the Mittal family are shareholders in Bharti Telecom, a promoter company of Bharti Airtel. In addition, both own shares directly in Bharti Airtel. ET was the first to report on May 26 that Singtel had begun talks with Bharti
chairman Sunil Mittal to sell a small part of its holding in the Indian telco to the Mittal family as part of its portfolio management strategy. Singtel is keen to book some profit and redeploy some of the capital in new investment opportunities.
Volatile Stock
Sources in both the companies said the Mittals were initially keen to complete the acquisition of shares by early June. They were also in active dialogue with banks such as DBS, Standard Chartered, Citi, JP Morgan, MUFG and Goldman Sachs and had even lined up $1.5 billion of credit lines – as rupee debt or via the foreign portfolio investor (route -for the acquisition of shares. “They have certainly not abandoned it but it’s got pushed out,” said an executive. “And one of the key factors is the valuation mismatch. The Bharti stock has been quite volatile in recent months. ”
In May, the Airtel stock was 33% higher than in the year before although it is down from its high of ₹781.80, which it touched on November 24. In the past three months, it’s dropped 12%. The stock ended Wednesday at ₹693.95, up 1.41% from the previous day.
People familiar with the matter said the delay in closing the deal and the imminent 5G spectrum auction may mean the transaction is predicated on the strategy the partners adopt during the bidding process and how much money will need to be raised to acquire the airwaves, they said. Bharti and Singtel didn’t respond to queries.
Prized Possession
Singtel has been a shareholder in Bharti Airtel since 2000. The Mittal family and Singtel own 50.56% and 49.44%, respectively, in Bharti Telecom, which, in turn, holds a 35.85% stake in Bharti Airtel. In addition, Singtel and the Mittal family, through investment companies, directly hold 14% and 6.04%, respectively, in the telco. The effective shareholding of the Mittal family in Bharti Airtel is 24.13% while that of Singtel is 31.72%.
The plan was for the Mittals to acquire about 4% of what Singtel owns in Bharti Airtel, or a 2% stake sale in Bharti Telecom, as an inter-promoter transfer of shares. Selling Bharti Airtel shares worth $1.5 billion would have reduced Singtel’s holding to less than 28.6% while divesting shares worth $2 billion would have lowered it to 27.60%, said people with knowledge of the matter.
At the end of May, Singtel said its underlying net profit for fiscal year 2022 grew 11% from the year before to S$1.92 billion, mainly lifted by associate company Bharti Airtel’s turnaround. It posted a nearly 164% on-year jump in consolidated net profit to ₹2,007.8 crore in the March quarter, its sixth successive quarter in the black.
