Warburg Pincus, a United States-based private equity firm has entered into a deal with India’s largest telecom company Bharti Airtel on Tuesday. In 2005, Warburg Pincus completely exited from Bharti Airtel has returned to the company to buy a stake in its DTH (direct-to-home) arm Bharti Telemedia for an amount worth $350 million. Warburg Pincus was among the earliest investors in Bharti Airtel. Between the period of 1999 and 2001 Warburg Pincus had invested $292 million in Bharti Tele-Ventures (as the company was called then) for buying a 19% stake. We take a look at the $350 million deal between Bharti Airtel and Warburg Pincus in 7 points.
- Warburg Pincus is a 51-year old US-based private equity firm having a presence in United States, Europe, Brazil, and two Asian nations — India and China. In a major development, Warburg Pincus has entered into an agreement on Tuesday to buy a 20% stake in Bharti Airtel DTH arm for an amount of $350 million.
- Under the deal, Bharti Airtel will sell 15% stake in Bharti Telemedia, while the remaining 5% will be sold by another Bharti entity, Bharti Airtel said in a statement.
- Once after the deal between Bharti Airtel and Warburg Pincus closes, Bharti Airtel will own 80% stake in the DTH unit and rest 20% would come under the control of Warburg Pincus.
- Viraj Sawhney, managing director of Warburg Pincus India, will join Bharti Telemedia board as part of the deal.
- Bharti Telemedia operates under the brand Airtel TV and has about 14 million subscribers and a revenue of about $550 million in the 12-month period ended 30 September.
- “Airtel TV is very well positioned in the DTH space, and we are committed to grow our share of the market through a combination of innovation, value engineering, customer service and distribution initiatives,” Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, said.
- “The Indian digital TV market is expanding rapidly and we believe that Airtel DTH is well positioned to capitalise on incremental growth in digitisation and new TV penetration in Tier 3 and 4 towns and rural areas,” Vishal Mahadevia, MD and co-head, Warburg Pincus India, said.
Bharti Airtel-Warburg Pincus old affiliations
- At the time when Warburg Pincus invested $292, Bharti was then valued at $1.5 billion. When Bharti went public in January 2002, Warburg’s stake came down to 15%.
- Later in 2004-2005, Warburg sold 3.35% stake in the company for about $208 million. Bharti was then valued at $6.21 billion.
- In March 2005, Warburg sold another 6% stake in Bharti for $560 million when the company was valued at $9.3 billion. The same year in October Warburg sold its final 5.65% stake to Vodafone for $847.5 million.
- The company’s valuation at that time was $15 billion, which was 10 times when Warburg had invested five years ago, thus making Warburg’s total realisation at $1.6 billion, which was over 5.5 times its investment amount.