The AGR payment is a cash obligation of the Indian operations. As on December 31, 2019, the firm had consolidated cash and short term investments of $4.2 billion, with around $2.3 billion held at the Indian operations.
Moody’s Investors Service said on Wednesday said Bharti Airtel has the financial capacity to withstand a payout of $5 billion in statutory dues. The Supreme Court earlier this month directed telecom firms to comply with its October 24, 2019 judgment upholding the Department of Telecommunication’s (DoT) definition of adjusted gross revenues (AGR). Bharti recorded a Rs 35,300 crore ($5 billion) liability for past-due AGR fees associated with this litigation, but is still completing its self-assessment to determine the final amount, Moody’s said.
It said a Rs 35,300 crore cash payment will not cause a significant deterioration in the credit quality of Bharti Airtel while in the alternate scenario of a smaller cash payment of Rs 25,200 crore reflecting the principal and interest amount only, would position the company more comfortably within its current rating. Full payment is to be made by March 17. “Recent capital-raising activities provide additional liquidity to fund the AGR payment,” it said.
The AGR payment is a cash obligation of the Indian operations. As on December 31, 2019, the firm had consolidated cash and short term investments of $4.2 billion, with around $2.3 billion held at the Indian operations. “Following recent capital-raising, we estimated (Bharti’s) cash is over $5.0 billion, which can be used to fund the final AGR payment,” it said. Moody’s further said that fundamentals in the Indian telco industry are improving, but uncertainty around the sustainability of the improvement and future cash requirements (including 4G/5G spectrum auction) remains.
Moody’s said India accounts for around 75 per cent of Bharti Airtel’s debt and 60 per cent of EBITDA. “Debt levels and cash costs are high for this segment and need to be serviced from India’s own organic cash flow,” it said. “Cash and EBITDA generated at less than wholly-owned subsidiaries is not directly available to service debt at India. As a result, a significant expansion of India’s cash flow is required to achieve meaningful debt reduction on a consolidated basis,” it added.