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Bharti Airtel: Retroactive Outlook Revision

Moody’s and S&P reaffirmed the issuer rating and senior unsecured debt ratings of Bharti Airtel Ltd (BHARTI IN) at Baa3/BBB- but revised the rating outlook to negative from stable on 26-April and on 3-May, respectively.


S&P’s key rationales for a negative outlook includes (1) FFO-to-debt multiple falling below 20% at 18.5% for FY18 (though S&P expects FFO-to-debt multiple to improve to 20-21% in FY19 and to 22-23% in FY20); (2) Bharti’s elevated debt-to-EBITDA multiple of 3.6x (though S&P expects debt-to-EBITDA multiple to improve to 3.3x to 3.5x in 2019); (3) Rising capex due to investment in the 4G network in 2018 (though the agency expects the capex to decline gradually after 2018). The agency cited a scenario for a downgrade in next 12-18 months if cut-throat competition in Indian wireless business continues, or de-leveraging does not materialize and FFO-to-debt multiple remain below 20%.

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