Bharti Airtel’s strong operating performance for its fiscal Q1 ended 30 June and efforts to reduce its debt continue to support its stable outlook for the rest of the year and its Baa3 credit profile, said Moody’s.
The company’s reported Q1 figures, however, do not fully reflect its debt reduction from the proceeds associated with Bharti’s African tower sales (Moody’s estimates it will be $2.2 billion in total) and the $1 billion bond issuance in June being used to refinance existing debt. These factors will eventually help offset the impact of the spectrum deferred payment liabilities that will hit its balance sheet by 31 March 2016.
Overall, Moody’s estimates Bharti’s adjusted leverage, as measured by adjusted debt/EBITDA, increased to 3.1x for the 12 months to June from 2.8x at March year-end. This increase primarily reflects the INR64 billion bond issuance completed in June and the recognition of an additional portion of deferred payment liabilities related to the March spectrum auctions. Proceeds from the bond issuance will eventually be used for debt reduction.
Excluding such deferred payment liabilities related to the spectrum auctions, Bharti’s adjusted leverage would have been around 2.6x for the 12 months to June, evidence that the company is deleveraging from the prior year.
The stable rating outlook reflects Moody’s expectation that Bharti will continue to grow its core Indian and African wireless businesses, and that the group will continue to deleverage on both an absolute and relative basis.
Full details on Bharti’s recent set of results can be found here.