Bharti Airtel dips 4% as investors book profit amid ICRA’s rating downgrade

Bharti Airtel shares slumped 4 per cent to Rs 435 on the BSE on Tuesday after rating agency ICRA downgraded the company’s long-term rating from “AA” to “AA-“on higher-than-anticipated provision for dues towards license fees on adjusted gross revenues (AGR) and spectrum usage charge.

The telecom services provider’s stock hit a multi-year high of Rs 456 in intra-day trade on Monday. In past seven trading days, it rallied 24 per cent, as compared to 1.5 per cent rise in the S&P BSE Sensex till Monday.

Although Bharti Airtel has not tied up funds for the same, this liability, if materialises is expected to be funded through a bridge loan, which would result in deterioration in debt coverage metrics in near term.

This provisioning follows the communication from Department on Telecom (DoT) that mandated the operators to pay the license fee and other dues after carrying out their own assessment within timeline stipulated by the Supreme Court. Moreover, additional provisioning related to indemnities to be paid to certain investors of Airtel Africa is also a credit negative, ICRA said in a rating rational.

Despite debt reduction followed by deleveraging attempts (and some on the anvil), the coverage metrics continue to remain weak as reflected by gross debt/OPBDITA of 3.95 times (annualised for H1FY2020). However, this is expected to go up further, if the AGR related liability crystalizes and is funded through borrowings, it added.