Bharti Airtel raises Rs 9,050 cr via bonds ahead of auctions

Telecom operator Bharti Airtel has raised $1.25 billion (Rs 9,050 cr) via dollar-denominated bonds from a clutch of international investors, tying up funds ahead of impending auctions of 5G spectrum.

The debt was raised at considerably low interest rates, though they carry the risk of the US currency appreciating in value against the Indian rupee.

$750 milion was priced at the yield of the 10-year US treasury note plus 1.875 percentage points, which currently comes to around 3.25% per year. The senior bonds are valid for 10.25 years.

Another $500 million was priced at a fixed coupon rate of 3.975% via perpetual bonds.

“This is a lowest every yield on 10 year and perpetual bonds for Bharti Airtel,” the company claimed.

Over 30% of the orders were from APAC , over 45% from EMEA with
the balance from US accounts.

Over 95% allocation of the senior bonds (and 93% in the case of the perpetual bonds) were made to asset managers, insurance companies and real money accounts with the balance to private banks, corporate, broker dealers and others, Bharti Airtel said.

The company has been able to raise funds at such low rates due to historically low interest rates in the US.

Despite signs of rising inflation, especially in global commodities and real estate markets, the US Federal Reserve has held off on raising interest rates for fear of triggering a global correction in asset prices, including in stocks.

It has also been encouraged to keep its rates at near zero levels due to somewhat manageable inflation levels.

However, many experts have warned that the relentless inflation of US dollar supply by the US Fed is causing asset prices to rise, and will soon result in runaway prices for essential commodities as well. This could cause bond yields to rise.

Indian telecom companies will need to raise more money in coming days to fund the impending purchases of vast amounts of spectrum to launch 5G services.

Only the market leader Reliance Jio has managed to raise billions of dollars by selling its equity shares, and others are likely to be forced to raise money via debt.