India's Bharti Airtel to buy back 20% stake from Warburg

The move will help the company pare debt and bolster its balance sheet

Motorist drive past a Bharti Airtel Ltd. store in Mumbai, India, on Saturday, April 21, 2018. Bharti Airtel are scheduled to release earnings on April 24. Photographer: Dhiraj Singh/Bloomberg

Bharti Airtel, India’s second-largest wireless operator, will buy back a 20 per cent stake in its digital unit from Warburg Pincus for 31.3 billion rupees ($430 million) to regain control of the company and study options to unlock value.

The carrier, controlled by billionaire Sunil Mittal, will pay Warburg Pincus in cash and shares of the flagship firm in return for the Bharti Telemedia stake, it said in exchange filings on Wednesday. It will also set up a panel to look at reorganising its non-telecom operations.

Bharti’s restructuring plan follows a familiar strategy adopted by its larger rival, Mukesh Ambani’s Reliance Industries, which also reorganised its digital assets in 2019 - a move that helped it lure $20bn last year through stake sales to global giants including Facebook and Google.

Asset sales will help Bharti, which posted a surprise turnaround in the most recent quarterly earnings, pare debt and bolster its balance sheet.

Mr Mittal told the Economic Times newspaper this month that Bharti wants to develop the digital unit into a parallel entity that can explore bringing in investors after scaling up.

The tycoon plans to create a step-up entity that can become the holding company for both the listed flagship Bharti Airtel as well as Airtel Digital, according to the report.

Bharti reported the highest quarterly profit since 2016 earlier this month, topping all analyst estimates, boosted by a jump in new customers as well as improving revenue from each user. Its shares have advanced almost 17 per cent this year, surpassing the rise in benchmark S&P BSE Sensex.