Moodys upgrades Bharti Airtel, subsidiarys outlook from stable to positive on improving operating performance, credit metrics

Global rating agency Moody's Investors Service has revised the outlook to positive from stable for Bharti Airtel and its subsidiary Bharti Airtel Int'l (Netherlands) B.V, the agency said in a statement on Tuesday.

It has also affirmed Airtel's Ba1 corporate family rating (CFR) and senior unsecured rating, as well as the Ba1 rating on the backed senior unsecured notes issued by its subsidiary, the statement said. 

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"The outlook change to positive reflects Bharti's improving operating performance and credit metrics which, if sustained, could support an upgrade to investment grade within the next 12-18 months," says Annalisa Di Chiara, a Moody's Senior Vice President, said in a press statement.

"The continued expansion of profitability, particularly at its core Indian mobile business, together with a steady reduction in its balance sheet debt, is needed to mitigate the potential effect on credit metrics of significant investments in 5G and the compounding growth of deferred liabilities during the moratorium period," added Di Chiara, who is also Moody's lead analyst for Bharti Airtel.

The telecom company on Monday also announced a 20-25 per cent tariff hike for its prepaid offerings from November 26, 2021. Moody’s terms this as a meaningful step to drive ARPUs (average revenue per user) higher and backs the agency’s expectation of rising profitability in 12-18 months.

Similarly, Bharti Airtel has been right spot in the telecom sector with opening up Rs 21000 crore rights issue in August, which got completed successfully in October. 

Moreover, the company has also accepted the 4-year moratorium for payment of its statutory dues payable to the government comprising around INR500 billion of spectrum liabilities and INR280 billion of annual gross revenue (AGR) dues (both amounts as of 31 March 2021).

In the last four months, the stock has outperformed the benchmark as it surged nearly 47 per cent on the BSE, as compared to an over 15 per cent rise in the S&P BSE Sensex during the same period. The stock on Tuesday closed over 2 per cent to Rs 759.5 per share near a 52-week high hit intraday today.