Bharti Airtel share price: Shares of Sunil Mittal-led Bharti Airtel cracked nearly 6% in early morning trade on Friday after Moody's Investors Service placed the telecom company's rating on review for downgrade.
Shares of Sunil Mittal-led Bharti Airtel cracked nearly 6% in early morning trade on Friday after Moody’s Investors Service placed the telecom company’s rating on review for downgrade. Reports on Thursday said Moody’s has placed Bharti Airtel’s rating on review for downgrade following low levels of profitability and expectation of weak cash flow. Following the report, Bharti Airtel share price slipped 5.8% to an over one-week low of Rs 288.7 per share on the National Stock Exchange.
On the BSE, Bharti Airtel share price slipped by 5.2% to a low of Rs 290 per share in early morning trade today. Bharti Airtel was the top loser on both the BSE Sensex and NSE Nifty on Friday. According to a statement issued on Thursday, the US-based agency Moody’s has placed on review for downgrade the ‘Baa3’ issuer and senior unsecured rating of Bharti Airtel and the ratings on the backed senior unsecured notes issued by Bharti’s wholly-owned subsidiary, Bharti Airtel International (Netherlands) B V.
‘Baa3’ is the lowest investment-grade bond ratings. Any downgrade would put the rating in speculative grade. Moody’s Vice President and Senior Credit Officer Annalisa DiChiara said: “The review for downgrade is primarily driven by our expectation that Bharti’s cash flow generation will remain weak and leverage elevated… Because we believe a more rational competitive environment in India’s telecommunications market is unlikely over the next 12-18 months, the review also reflects uncertainty as to whether the company’s profitability, cash flow situation and debt levels can improve sustainably and materially over the same period.” DiChiara is Moody’s lead analyst for Bharti.
The review also reflects the company’s low levels of profitability, particularly from its core Indian mobile operations, negative free cash flow and higher debt levels to fund capital spending, it said. According to Moody’s, the review on Bharti’s rating will focus on the company’s commitments and plans to substantially reduce debt levels significantly over a short period of time; and plans to turnaround the underlying Indian mobile operations. While the majority of the USD 1.25 billion raised from the pre-IPO of its African business will be used to reduce debt, leverage will only improve marginally, Moody’s said.