Bharti Airtel Limited may delay its planned Initial Public Offering (IPO) of its Africa unit due to the turmoil in emerging-market stocks, a source close to the company said.
The company, which was originally aiming to list the unit in London by March, has pushed back the share sale by about half a year, according to the source.
It plans to seek an enterprise value of about $8 billion for the Africa business, the source said.
In August, Singapore Telecommunications Limited, which owns a stake in Bharti’s parent company, said the listing was slated for the first quarter of next year.
The equity rout has derailed IPOs around the world, with companies from Spanish oil refiner, Cepsa, to U.S. filmmaker, STX Entertainment, scrapping or postponing their offerings.
Bharti, backed by billionaire, Sunil Mittal, is seeking the listing after spending heavily to acquire spectrum in India and defend its position in the country against disruptive upstart Reliance, Jio Infocomm Ltd.
It has operations in 14 African markets, including Kenya, Tanzania, Nigeria, and Ghana, according to its latest annual report.
No final decisions have been made, and plans for the offering could change, our source said.
A representative for Bharti said preparations for the Africa unit IPO were proceeding according to plan and that there were no changes.
The company remains “very confident” about the listing process, the representative said.
Earlier in the week, Bharti Airtel’s Africa unit said it was raising $1.25 billion by issuing fresh shares to six global investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group International in the first part of a two-stage fund raising exercise aimed at paring debt.
The second stage is an IPO of the Africa unit likely on the London bourses through which the company plans to raise a similar amount, again to reduce its debt.
Airtel will dilute over 28% stake to around 65%, in its Africa unit via the pre-IPO share issue.
The company has faced huge pressure on revenue and profits over the last couple of years in India due to a brutal price war aggravated by the entry of Reliance Jio Infocomm in September 2016.
The Airtel stock was down 6% to close at Rs297.65 in mid-day trade on the BSE Thursday. It had gained nearly 11% a day before, on the Africa fund raising news.
“Risk to the improvement includes a competition-induced decline in profitability of its India wireless business as well as a sharp depreciation in the Indian rupee (INR). Rupee depreciation will result in a higher translated foreign currency debt and push up Bharti’s capital expenditure,” S&P said.
It added however that the higher translated foreign currency debt would largely be a non-cash adjustment.
Bharti’s leverage (FFO-to-debt ratio) is likely to remain slightly below 20% in the fiscal year ended March 2019, before improving to about 22% in fiscal 2020.
“We expect the company’s India wireless business to stabilize and return to growth over the next 12-18 months. The improved profitability of Bharti’s Africa operations should also continue to support its financial position,” the ratings agency said.
It expects Bharti Airtel to retain a controlling stake in its African unit even after the proposed IPO for the unit.
“In our view, Bharti could divest about 30% stake in its Africa operations through the stake sale, while the extent of dilution through the IPO is uncertain. We expect no immediate impact on the company’s business position from this deal,” S&P said.
It added that Bharti Airtel continues to prudently manage its leverage by exploring options to monetise assets and reduce debt.
However, sustainable improvement in the company’s financial position depends on revival of its operating performance in India.
Bharti said last week its African unit raised $1.25 billion from investors, including Warburg Pincus, Temasek Holdings Pte, and SoftBank Group Corp.