Bharti Airtel’s Liabilities For This Fiscal Is Thrice The Cash It Generates

Bharti Airtel Ltd.'s liabilities for the ongoing financial year is more than three times the average cash generated by it in the last decade amid a bruising tariff war unleashed by Reliance Jio Infocomm Ltd.

Billionaire Sunil Bharti Mittal-controlled telecom operator has liabilities worth Rs 71,460 crore maturing in the year through March 2019, according to the company's annual report. That compares with Rs 20,719 crore of average cash generated.

Its total financial liabilities stood at Rs 1,57,616 crore for the year ended March 2018, which is 9 percent higher compared with last year. The consolidated liability includes other financial liabilities that are routine payables for the company. These routine liabilities of ongoing business should not be mixed up with the debt, a Bharti Airtel spokesperson said.

For the financial year 2017-18, the company reported its biggest drop in revenue since its listing as the upstart led by the nation's richest man Mukesh Ambani disrupted the country's telecom industry with cheap data. This also led to consolidation among incumbents in the world's second-biggest telecom market to unlock value and pare debt. The number of private operators declined from eight to three since the launch of Jio in September 2016.

International ratings agency Moody's Investors Service said it may downgrade the credit rating of Bharti Airtel's debt within the next six to 12 months if the heightened competition persists.

Bharti Airtel can either refinance its debt or sell stake in various investments to repay debt. Though the company sold its stake in the direct-to-home and tower arm businesses to lower debt, its leverage deteriorated. The company reported its highest-ever leverage ratio and the lowest interest coverage ratio in the previous fiscal.

The company remains conservative in the way it manages the overall debt, its repayment schedule, as well as keeping a diversified pool of sources of refinance, available at all times, the spokesperson said.

“We have a strong balance sheet and a comfortable debt to Ebitda (earnings before interest, tax, depreciation and amortisation) ratio, especially in the light of our preemptive approach towards asset monetisation opportunities, much like the past divestments of stake in tower arms, tower sales in Africa and announced stake sale in our DTH business,” the company's spokesperson said.

Africa Operations

On a positive note, Bharti Airtel's African operations continue to outperform as the company reported a net profit for the first time in that region.

The company added close to 12.5 million customers in that region in the year ended March 2018. It expects the number of subscribers and revenue in the region to continue growing on increasing mobile data consumption. Bharti Airtel is also looking to list its African business in an internationally-recognised stock exchange.

Bharti Airtel's plans to take its African business public will help reduce its debt but only partially, BloombergQuint reported earlier. Even a 49 percent stake sale in the African business at highest valuations prevailing in the African industry, Bharti Airtel would fetch close to Rs 14,122 crore, according to data compiled by BloombergQuint. This would bring down its debt by just 15 percent.