Bharti Airtel slips 5% after promoters sell 2.75% stake via block deals

Shares of Bharti Airtel dropped 5.4 per cent to Rs 561 on the BSE on Tuesday after its promoter, Bharti Telecom, sold some stake in the telecom services provider through open market deals today.

At 09:15 am; around 155.71 million equity shares representing 2.85 per cent of total equity of Bharti Airtel changed hands on the BSE, the exchange data shows. The names of the buyers are not ascertained immediately.

According reports, Bharti Telecom, a promoter entity of Bharti Airtel, was to sell 2.75 per cent stake worth $1 billion in the telecom company via block deals on Tuesday morning. Up to 150 million shares will be available for prospective investors through a book-built offering.  The shares are being offered to large, high networth investors at 6 per cent discount to the closing price of Rs 593 a share as on March 22. JP Morgan was to manage the sale with a floor price of Rs 558 per equity share, added the report.

As on March 31, 2020, Bharti Telecom held about 38.79 per cent stake in Bharti Airtel which will be reduced by 2.75 [per cent after the deal. The total promoter shareholding as per exchange data currently stands at 58.98 per cent. Other than Bharti Telecom, other promoters in Bharti Airtel include, Pastel Ltd (13.91 per cent stake), Indian Continent Investment Ltd (6.08 per cent stake) and Viridian Ltd (0.20 per cent stake), data shows.

In January 2020, the Sunil Mittal-led Bharti Airtel had raised $2 billion through a qualified institutional placement (QIP) which saw participation by highly reputed global and Indian investors. The company issued 323.6 million equity shares at price of Rs 445 per share. After the QIP issue, the combined holding of the promoter and promoter group, including Singtel and the Bharti Group, in Airtel would reduce to 58.98 per cent from 62.70 per cent.

Analysts remain bullish

Most analysts maintain a positive outlook for the stock and suggest investors use the decline to buy from a long-term perspective.

"Bharti Telecom's 2.75% stake sale in Bharti Airtel for $1.1 billion is mainly to de-lever its balance sheet as the dividend payments from Bharti Airtel are insufficient to service its debt of Rs 85 billion. The stake sale will lower Singtel and promoters' effective stake in Bharti Airtel to 32% and 24% respectively. This is not a de-rating event and we see any potential pullbacks in the stock due to this as a buying opportunity. Maintain Buy with target of Rs 660/share," wrote analysts at Jefferies in a May 25 note.

The stock hit an all-time high of Rs 612 on Wednesday, June 20, 2020 on the BSE. In past six months, it had outperformed the market by surging 41 per cent, as compared to 24 per cent decline in the S&P BSE Sensex till Friday.

At 09:29 am; the stock was trading 3.4 per cent lower at Rs 573 on the BSE, against 0.87 per cent rise in the S&P BSE Sensex. A combined 194 million equity shares changed hands on the counter on the NSE and BSE so far.