S&P keeps Bharti Airtel’s rating unchanged post capex plan

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New Delhi | December 1, 2015 3:30 PM

Standard & Poor's has kept rating of Bharti Airtel unchanged post the company's plan to spend Rs 60,000 crore over the next three years even as it anticipates that the investment will slow down the improvement in Bharti's financial ratios.

Bharti AirtelStandard & Poor’s has kept rating of Bharti Airtel unchanged post the company’s plan to spend Rs 60,000 crore over the next three years even as it anticipates that the investment will slow down the improvement in Bharti’s financial ratios. (Photo: PTI)

Standard & Poor’s has kept rating of Bharti Airtel unchanged post the company’s plan to spend Rs 60,000 crore over the next three years even as it anticipates that the investment will slow down the improvement in Bharti’s financial ratios.

“… its rating on Bharti Airtel (BBB-/Stable/–) is unaffected by the company’s plan to spend Rs 600 billion over the next three years on transforming its network in India.”

“Although we anticipate that the investment will slow down the improvement in Bharti’s financial ratios, the ratios will still remain in line with our expectations for the rating,” Standard & Poor’s Ratings Services said today.

The US-based credit rating agency said it expects the company’s ratio of funds from operations (FFO) to debt to consistently stay above its downgrade trigger of 20 per cent.

“Bharti’s planned Rs 600 billion investment includes Rs 150-170 billion for annual capital expenditure; Rs 30-40 billion annually for spectrum payments from fiscal 2017 (year ending March 31, 2017); and about Rs 60 billion for possible additional spectrum acquisition over the next two years,” S&P said.

The revised capital expenditure and possible new spectrum acquisition, though discretionary, could result in Rs 150 billion of additional cash outflow compared with its earlier expectations.

“Therefore, we estimate Bharti’s ratio of FFO to debt will reach 25 per cent in fiscal 2018, compared with our earlier expectation of 30 per cent from 21 per cent in fiscal 2015,” it said.

The agency further said it expects competition in India’s telecom sector to intensify over the next one to two years following the entry of Reliance Jio.

“However, we do not anticipate significant price-based competition that could weaken Bharti’s operating performance.

“In addition, the company’s enhanced network capacity and efficiency following the investment will help it tap significant growth in data in India and provide better network coverage and service quality,” it said.

Also, Bharti’s financial position has some headroom to withstand intense competition, it added.

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