Mumbai: Amid easy global liquidity and softening US bond yields, Bharti Airtel is preparing to raise a billion dollars with an offer of perpetual bonds — securities with no maturity date for investors.
Last week, the second-largest telecom company sounded out half a dozen MNC banks on the plan to tap offshore institutional investors. While the quasi debt paper under the proposed offer would be ‘perpetual’ in character for investors, the issuer Bharti would have a call option — or, the right to repay its lenders — after five years.
This would be Bharti’s second perpetual bond float. Reliance Industries and Bharti are among the few companies that have tapped the international money market with such bonds. The company is likely to enter the market in February, said a person aware of the plan. Bharti Airtel did not immediately respond to ET’s query.
The company may use the fund for business expansion and refinance more expensive debt raised a few years ago.
“The terms and other details are yet to be finalised,” said another person. While the predominant portion of the targeted amount could be raised through perpetual bonds, a slice of it may also be raised as 10-year vanilla offshore bonds.
All Indian corporates, particularly those which have been less impacted by the Covid-induced slowdown, are in a position to reprice foreign overseas borrowings with cheaper money that has pushed down bond yields. The yield on the 10-year US Treasury bill, which serves as a benchmark for pricing debt, moved between 0.55-1.88% in 2020 — down from a range of 2.44-3.24% in 2018. The security is currently trading at 1.15%.
The interest cost on debt raised by a private company is a mark-up on the sovereign paper — with companies having a higher rating and good credit history paying a lower margin than others. “The company may save at least 50 basis points with a perpetual bond sale,” said an investment banker.
About a year ago, Bharti Airtel raised $250 million through perpetual bonds at 5.65% with its wholly-owned subsidiary Network i2i in Mauritius issuing the securities.
In the first week of 2021, Indian firms raised $2.1 billion from overseas markets — about 15% of the total debt raised from offshore lenders and the most mobilised during the opening week of a year. State Bank of India, Exim Bank and Shriram Transport Finance sold bonds at historic low rates in the past week. SBI raised $600 million, five-and-a-half-year money, offering a 1.8%. Shriram Transport mopped up $500 million (three-and-a-half years) at 4.4% and Exim Bank at 2.25% for 10-year money.