CRISIL upgrades Bharti Airtel’s long-term rating to 'AA+/stable'; short-term rating reaffirmed

Ratings agency CRISIL Ratings has upgraded its long-term rating on the bank facilities and debt programme of Bharti Airtel Ltd to ‘CRISIL AA+/Stable’ from ‘CRISIL AA/Stable’. It reaffirmed the ‘CRISIL A1+’ rating on the commercial paper programme.

CRISIL has also withdrawn its rating on Rs 1,500 crore non-convertible debentures (NCDs) of Bharti Airtel as they have been fully repaid. CRISIL has received confirmation of no dues against these NCDs from the debenture trustee. The rating action is in line with CRISIL’ policy on withdrawal of rating on NCDs.

A CRISIL statement said the rating action reflects continued improvement in Bharti Airtel's operating metrics, resulting in a healthy financial risk profile.

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It expects further improvement in the overall credit risk profile of the company over the near to medium term. The bright spots are improving cash accruals, deleveraging plans, including rights issue, notwithstanding adjusted gross revenue (AGR) dues and additional expenditure for acquiring spectrum at the auction held in March 2021.

The country’s second-largest telecom firm had in August reported a consolidated net profit of Rs 284 crore for the June quarter against a loss of Rs 15,933 crore a year ago when the company made provisioning for AGR dues. On a sequential basis, Airtel's net profit slumped over 62 per cent from Rs 759.2 crore in the March quarter -- a result of higher finance and depreciation costs, as also an exceptional gain in the previous quarter.

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CRISIL expects Airtel's ARPUs (average revenue per user) to improve, aided by recent revisions in some plans and up-trading by subscribers, resulting in further improvement in operating revenue and profit.

It said a broad-based tariff hike, as was last seen in December 2019, is likely in the next six-nine months.

On August 29, 2021, Bharti Airtel’s board approved raising funds the rights issue of up to Rs 21,000 crore. Of this, 25 per cent will be raised in October 2021, and the balance in two additional tranches in the next 24 to 36 months.

"Thus, leverage is likely to improve to below 2.5 times by end of fiscal 2022, aided by continuing healthy operating performance and deleveraging plans," CRISIL said.

The ratings agency also thinks that participation in 5G spectrum auction could be limited at current reserve prices. Besides, capex to build 5G network should not materially change capex outgo from the current levels.

Any significant increase in investments towards 5G roll-out will be cushioned by the already announced rights issue. Hence, net leverage will sustain below 2.5 times, it said.

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