Indian telecom major Bharti Airtel has approved fundraising through a rights issue because it has to pay a huge adjusted-gross-revenue tax bill for 2021-22.
In a regulatory filing, the country’s second-largest telecom company said its board has approved raising up to 210 billion rupees (US$2.86 billion) through a rights issue. “Accordingly, the board approved the issuance of equity shares of the face value of five rupees each of the company on rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of up to 210 billion rupees.”
The rights issues will be priced at 535 rupees per equity share, while the rights entitlement ratio will be one equity share for every 14 equity shares held by eligible shareholders as of the record date. As for terms of payment the company said, “25% on application and balance in two more additional calls as may be decided by the board/committee of the board from time to time based on the company’s requirements within an overall time horizon of 36 months.”
After the Supreme Court in 2019 widened the definition of adjusted gross revenue computation to include revenue from non-telecom revenues, the telecommunication department pegged Bharti Airtel’s adjusted gross revenue liability at 439.80 billion rupees ($5.98 billion). The company has so far paid up 180 billion rupees.
Meanwhile, Bharti Airtel, along with Vodafone Idea and Tata Teleservices, moved the Supreme Court to contest the telecommunication department’s calculation. It claimed that the department’s claim was 130 billion rupees too high.
The company’s struggle to clear the adjusted gross revenue tax bill has been taking a toll on its balance sheet and the bottom line for the last couple of years due to the provisioning of huge amounts to service the obligation. Moreover, the predatory pricing unleashed in 2016 by Reliance Jio, a firm promoted by India’s richest man, Mukesh Ambani, has kept the overall telecom tariffs low and affected Bharti Airtel’s margins.
Meanwhile, American internet giant Google is reportedly planning to invest in Bharti Airtel and is in an “advanced state of negotiations,” reports the Times of India. If the deal goes through it could provide the company a much-needed boost to its balance sheet.
The condition of its rival Vodafone Idea is even more precarious as it has to pay up 580 billion rupees as adjusted gross revenue tax. Its promoter, Kumar Mangalam Birla, recently stepped down as non-executive director and non-executive chairman and offered to give up his 27% stake to the government to keep the company afloat. Market analysts have raised questions about Vodafone Idea’s future as a going concern as it has to contend with a huge debt burden and a dwindling subscriber base.