Airtel Unveils Rs 28,000 Crore Share Swap to Boost Parent’s Stake in Airtel Africa and Enhance Mittal Family’s Holdings.
On Wednesday, Bharti Airtel’s board sanctioned a significant ₹28,220 crore share-swap agreement with Indian Continent Investment (ICIL), aimed at augmenting its stake in its UK-listed subsidiary, Airtel Africa. This transaction is notable as it is one of India’s largest related-party dealings, wherein ICIL, a family office investment vehicle for the Mittal family, will raise its stake in Bharti Airtel by approximately 2.3 percentage points. Analysts view this move as a strategic advantage for Airtel, noting that the market had anticipated an all-cash transaction, which would have necessitated a substantial drawdown from the company’s cash reserves.
The share-swap agreement allows Bharti Airtel to conserve cash while simultaneously reducing the ownership gap with another significant promoter, Singtel Group. ICIL will acquire approximately 146.7 million new Airtel shares at a price of ₹1,923 each through a preferential allotment. This issue price reflects a 9.5% premium over the last closing price prior to May 13, 2023. In exchange, ICIL will transfer its entire stake of approximately 595.2 million shares in Airtel Africa, thus enabling Bharti Airtel to increase its ownership in the African subsidiary from 62.73% to 79.04%.
Analysts believe that this elevated stake in Airtel Africa will ultimately bolster Bharti Airtel’s earnings per share (EPS) and reinforce its operational foothold in Africa. The board has indicated that this transaction aligns with its objective to solidify shareholding in strategic subsidiaries, while also being favorable for existing shareholders. With an anticipated dilution of 2.4% for Indian shareholders, the overall assessment suggests that the earnings generated from this consolidated stake will outweigh the minimal dilution, thereby making the transaction both cashless and leverage-neutral.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)