KKR and pension giant Canada Pension Plan Investment Board are in talks with Bharti Airtel to acquire a significant stake in its listed tower-co Bharti Infratel. Airtel is looking to divest up to a 40% stake to a consortium of financial investors making them the single largest shareholder block. According to the articles, it would consider giving up management control depending on the valuation and the premium offered by the investors.
Airtel announced it had received board approval to explore monetization of a significant stake in Infratel (Airtel owns 71.96% of BHIN). It however did not provide much colour in terms in the quantum of stake that it plans to divest or the value.
Why Airtel wants to Sell Stake in Bharti Infratel ?
For Airtel as it would appear, help reduce its debt, gearing materially and give it flexibility to be more aggressive to compete with new entrant Jio. Management mentioned at 2Q results that majority of the proceeds from any stake sale would be largely used for debt reduction.
If Airtel’s stake were to fall to less than 51%, then we believe such a move could also be also positive for Bharti Infratel as it could eventually lead to improvement in the stock’s liquidity. Such a move could also reduce market perceptions that majority of control of tower-co remains in the hands of telcos and would also reduce any material risks of tower-co rental cuts in the future.