Air­tel un­der Moody’s lens for rat­ings down­grade


Bharti Air­tel Ltd’s credit rat­ing was placed un­der re­view for a pos­si­ble down­grade by Moody’s In­vestors Ser­vice on high debt lev­els and weak cash flow gen­er­a­tion.

Moody’s has placed on re­view for down­grade the Baa3 is­suer and se­nior un­se­cured rat­ing of Bharti Air­tel, and the rat­ings on the backed se­nior un­se­cured notes is­sued by Bharti’s wholly-owned sub­sidiary, Bharti Air­tel In­ter­na­tional (Nether­lands) BV, Moody’s said in a state­ment on Thurs­day.

Baa3 rat­ing means the en­tity is medium-grade, sub­ject to mod­er­ate credit risk and has an ac­cept­able abil­ity to re­pay short-term obli­ga­tions, ac­cord­ing to Moody’s In­vestors Ser­vice.

“The re­view for down­grade is pri­mar­ily driven by our ex­pec­ta­tion that Bharti’s cash flow gen­er­a­tion will re­main weak and lever­age el­e­vated,” An­nal­isa Dichiara, vice pres­i­dent and se­nior credit of­fi­cer at Moody’s, said in a state­ment.

The re­view by Moody’s also re­flects Bharti Air­tel’s low lev­els of prof­itabil­ity, par­tic­u­larly from its core In­dian mo­bile oper­a­tions, neg­a­tive free cash flow and higher debt lev­els to fund cap­i­tal spend­ing.

“Be­cause we be­lieve a more ra­tio­nal com­pet­i­tive en­vi­ron­ment in In­dia’s telecom­mu­ni­ca­tions mar­ket is un­likely over the next 12-18 months, the re­view also re­flects un­cer­tainty as to whether the com­pany’s prof­itabil­ity, cash flow sit­u­a­tion and debt lev­els can im­prove sus­tain­ably and ma­te­ri­ally over the same pe­riod,” Dichiara added.

Moody’s said that its re­view for the down­grade will fo­cus on Bharti Air­tel’s plans to re­duce debt lev­els sig­nif­i­cantly over a short pe­riod of time and its plans to turnaround the un­der­ly­ing In­dian mo­bile oper­a­tions.

“The rat­ings could be down­graded if the com­pany fails to use pro­ceeds re­ceived from its re­cent pre-ipo (ini­tial pub­lic of­fer­ing) of its African busi­ness or its pro­posed cap­i­tal-rais­ing ac­tiv­i­ties for debt re­duc­tion,” Moody’s said.

Bil­lion­aire Dilip Shanghvi’s Sun Petro­chem­i­cals Pvt. Ltd is plan­ning to en­ter the power gen­er­a­tion busi­ness, two com­pany ex­ec­u­tives aware of the devel­op­ment said.

Sun Petro­chem­i­cals through its af­fil­i­ate Sun Oil and Nat­u­ral Gas is al­ready into oil and gas ex­plo­ration and pro­duc­tion ac­tiv­i­ties in In­dia. “While ex­plo­ration and pro­duc­tion is do­ing fine for us, devel­op­ment or gen­er­a­tion of power is an­other seg­ment we think we can have a sig­nif­i­cant pres­ence in,” a Sun Petro­chem­i­cals ex­ec­u­tive, one of the two peo­ple cited above, said on the con­di­tion of anonymity.

The com­pany did not re­spond to an email sent on 6 Novem­ber.

Shanghvi, the con­trol­ling share­holder of In­dia’s largest drug maker Sun Phar­ma­ceu­ti­cal In­dus­tries Ltd, through his fam­ily and as­so­ciates owns a 19% stake in Su­zlon En­ergy Ltd, a lead­ing wind tur­bine maker. While Su­zlon pro­mot­ers own 20% of the com­pany, 5% is with len­ders and the rest with in­sti­tu­tional and re­tail in­vestors.

Sun Petro­chem­i­cals was founded in 1999 in a part­ner­ship with the erst­while In­dian Petro­chem­i­cals Corp. Ltd (IPCL), now part of Re­liance In­dus­tries Ltd (RIL), to man­u­fac­ture acety­lene car­bon black. Acety­lene car­bon black is used in bat­ter­ies, semi­con­duc­tive rub­ber and poly­mer com­pounds, con­duc­tive tapes, cur­ing blad­ders for tyres and other con­duc­tive ap­pli­ca­tions.

Shanghvi en­tered the oil and gas seg­ment in March 2015 when it ac­quired two oil and gas fields in Gu­jarat, Baola, and Mod­hera, from In­ter­link Petroleum. Both blocks were awarded in round one of bid­ding of the New Ex­plo­ration Li­cens­ing Pol­icy.

Tele­com op­er­a­tors, in­clud­ing Bharti Air­tel, Re­liance Jio and Voda­fone Idea Ltd, have in­formed the tele­com depart­ment about their readi­ness to con­duct proof of con­cept for the new “al­ter­nate dig­i­tal KYC (knowyour-cus­tomer) process” at two lo­ca­tions, as stip­u­lated.

The Depart­ment of Tele­com (DOT) has also is­sued the de­tails of the pro­ce­dure and modal­i­ties to be fol­lowed by tele­com op­er­a­tors for is­su­ing new mo­bile con­nec­tions us­ing the al­ter­nate dig­i­tal KYC process.

Ac­cord­ing to a DOT cir­cu­lar dated 6 Novem­ber, Bharti Air-

In its nearly four years of ex­is­tence, Sun Oil and Nat­u­ral Gas has bought stakes in five hy­dro­car­bon blocks. This July, it ac­quired 70% and 30% stake, re­spec­tively, from Re­liance In­dus­tries and BP In­dia, in Guj- arat’s Cam­bay Basin block for an undis- closed amount. Re­liance was the op­er­a­tor of the block and had won it in 2005 in an auc­tion.

In Au­gust, Sun Oil and Nat­u­ral Gas bid for the as­sets of debt-rid­den As­sam Co. In­dia Ltd, the coun­try’s old­est tea com­pany, which also has a pres­ence in in­fra­struc­ture.

In De­cem­ber 2016, Sun Oil bought a 33.3% stake in Hazira oil and gas field from Canada’s Niko Re­sources Ltd and was in talks to buy the rest from Gu­jarat State Petroleum Corp. Ltd. “Sun Oil and Nat­u­ral Gas wants to be the op­er­a­tor in whichever block it is. That is the rea­son the firm has been ac­quir­ing 100% stake in all the blocks.

It is aware of the mul­ti­ple ap­provals a com­pany has to take in case of part­ner­ships and it wants to avoid that sit­u­a­tion which leads to de­lay in work in most cases,” said the sec­ond ex­ec­u­tive, also re­quest­ing anonymity.

That ex­plains Sun Oil and Nat­u­ral Gas’s in­vi­ta­tion to prospec­tive buy­ers to pur­chase crude oil from the Cam­bay basin block, that it ac­quired three months ago.

“Field is un­der trans­fer to Sun Petro and pro­duc­tion is likely to com­mence from April. Crude oil pro­duc­tion to start with maybe around 1,000 bar­rels of oil per day (bpd) and peak pro­duc­tion maybe 3,000bpd. Sun Petro is op­er­a­tor of field with 100% par­tic­i­pat­ing in­ter­est,” Sun Oil and Nat­u­ral Gas says on its web­site.

RIL held 100% par­tic­i­pat­ing in­ter­est in the Cam­bay basin block (CB-10) be­fore farm­ing out 30% to BP In­dia in 2011. RIL had made its first oil find in the block in 2010. The block is spread across 635 sq. km.

Sun Oil and Nat­u­ral Gas has around 70 em­ploy­ees and plans to take the head­count to over 100, the first ex­ec­u­tive added.

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