Bharti Airtel $348.8m block sees strong demand

Indian mobile phone carrier was able to exercise an upsize option in an accelerated block of its towers business unit.

Investors continue to flock to India with Bharti Airtel becoming the latest company to tap the country’s equity capital markets.

Bharti Airtel, the country’s top mobile phone carrier, offloaded a 5% stake in its towers business unit Bharti Infratel in an accelerated block trade and raised Rs21,395 billion ($348.8 million).

Books opened Thursday afternoon in India, with Bharti Airtel initially aiming to sell 45 million shares in Bharti Infratel, but strong demand from global institutional investors allowed the company to exercise the full upsize option and sell 85 million shares in total, a banker close to the deal told FinanceAsia. Allocations were finalised Friday morning.

Bank of America Merrill Lynch, JP Morgan and UBS handled the transaction, which was conducted under the price priority method, a system used in India that accepts investor bids at multiple prices. The average price, or Vwap (volume weighted average price) was Rs251.71 per unit, a 7.4% discount to Thursday’s close, the person said. The floor was Rs250 per share.

The deal closed 1.3 times oversubscribed, with mutual funds accounting for a significant chunk of the book. Global long-only institutional investors bought up 70% of Bharti Infratel shares, while hedge funds purchased the remaining 30%, the banker said.

Bharti Airtel initiated the sale to ensure it is in compliance with new securities laws that require listed companies in India to have a minimum of 25% of its shares available on the stock exchange, the banker said.

Bharti Airtel, which previously owned 79.4% in the company as of June, has seen its stake drop 5% through Friday’s share sale. It now owns 75% of Bharti Infratel and as such, is in compliance with the requirements, according to a statement on India's National Stock Exchange website.

Proceeds from the sale will also go towards paying down Bharti Airtel's debt, which stood at $9.6 billion as of June.

Bharti Infratel is one of the largest tower infrastructure providers in India. Shares are up 62% so far this year up to August 8, and the company is trading at 25 times its 2015 earnings. Potential investors may have questioned how much upside is left in Bharti Infratel, given its strong performance this year, although the banker insisted most of the investor feedback was positive.

Bharti Infratel raised Rs41.719 billion in an IPO in December 2012, making it the largest public offering in India in two years. The shares represented 10% of the enlarged share capital, and similarly to this transaction, almost a quarter of the deal came from its four shareholders pre-IPO — Temasek, Goldman Sachs, Anadale and Nomura.

Return of confidence
This deal underscores the confidence that has returned to the country’s equity markets in the past few months. Investors returned in droves to Indian equity markets in May once it became apparent Narendra Modi would win the country's general election, and the trend continues. Shares in Bharti Infratel are up 24% since May, and the country's Sensex Index is up 16% in the same time period.

Reliance Communications raised Rs61 billion through a qualified institutional placement (QIP) and warrants issue in June, the largest ever equity deal by a private sector Indian corporate in rupee terms.

In July, Indian infrastructure companies Jaiprakash Associates and GMR Infrastructure each raised $250 million from QIPs.

And just this week, Prestige Estate Projects, one of the country’s largest real estate development firms, secured $100 million from a QIP. Similar to Friday’s deal, Prestige Estate experienced enough demand to warrant increasing the deal size from 18.75 million shares to 25 million shares.


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