Ahead of spectrum auctions, Airtel spends cash elsewhere

Bharti Airtel Ltd said it will buy the 20% stake it does not already own in its direct-to-home (DTH) business for a sum of ₹3,126 crore. About two-thirds of the consideration will be met through an issue of shares, while the rest will be paid in cash.

Just three years ago, Airtel had sold shares in its DTH venture to Warburg Pincus to increase cash levels. Evidently, the company believes it is sitting in a far more comfortable position now, as far as its balance sheet goes. Note that less than three months ago, the company had spent nearly ₹3,000 crore to increase its stake in Indus Towers Ltd. That decision, too, seemed intriguing at the time, raising questions on whether the company was throwing good money after bad. After all, the fragile state of Vodafone Idea Ltd does raise the prospect of significant value erosion at Indus Towers.