Airtel plans Rs 28,000 crore share swap: Deal with ICIL to raise parent’s stake in Airtel Africa & Mittal family’s stake in Airtel

Bharti Airtel’s board on Wednesday approved a ₹28,220 crore share-swap deal with Indian Continent Investment (ICIL) to raise its stake in UK-listed subsidiary Airtel Africa, while increasing ICIL’s holding in Bharti Airtel by about 2.3 percentage points in one of India’s largest related-party transactions.

ICIL is a Mauritius-based investment entity functioning as a family office investment vehicle for the Sunil Bharti Mittal family, a promoter group entity of Bharti Airtel. Analysts termed the move positive for Airtel, saying the Street had expected an all-cash transaction.

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That would have required the company to draw down its large cash reserves. Instead, the deal structure preserves cash while helping the Mittal family narrow the gap with another key promoter shareholder, Singtel Group.

The transaction will also allow the Mittal family to consolidate investments in Bharti Airtel, potentially easing future fundraising through equity sales, analysts said. “Instead of Bharti paying cash (of ₹28,200 crore) to buy ICIL’s Africa stake, it is paying through newly issued shares and would consolidate Africa holding to 79%. There is 2.4% dilution for existing shareholders in India,” Bank of America said in a research report on Wednesday.

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Under the agreement, Airtel will issue about 146.7 million new shares at ₹1,923 apiece to ICIL through a preferential allotment. The issue price represents a 9.5% premium to the previous closing price before the May 13 relevant date.

In return, ICIL will transfer about 595.2 million Airtel Africa shares, representing its entire 16.31% stake in the African subsidiary. The shares will be acquired at an 11.6% discount to the last closing price before May 13. The transaction will increase Bharti Airtel’s stake in Airtel Africa to 79.04% from 62.73%, while ICIL’s stake in Bharti Airtel will rise to 3.25% from 0.95%, according to analysts.

Another analyst said the higher holding in Airtel Africa would help Bharti Airtel benefit from the subsidiary’s growth trajectory by boosting earnings per share and strengthening ownership of its African operations. “The board recognised that the transaction is in line with the objective of consolidating/strengthening shareholding in a strategic subsidiary. Apart from being cashless and leverage-neutral, the transaction is accretive to EPS (earnings per share) of Airtel India with additional earnings outweighing the dilution,” Airtel said in a statement to exchanges.