Bharti Telecom needs much higher dividend income from Airtel to service loans: Analysts

Bharti Telecom Ltd (BTL) — the main promoter-level controlling company that owns 40.47% in Bharti Airtel — needs a much higher dividend payout from the Sunil Mittal-led telco from FY25 onwards to service its hefty interest costs, analysts said.

This is since BTL’s estimated annualised finance cost at Rs 3,183.2 crore is sharply higher than the modest Rs 600.6 crore and Rs 876.9 crore in dividend income it received from Airtel in FY23 and FY24 respectively.

According to analysts, BTL’s surging interest costs have been driven by its mounting debt — now at almost Rs 38,000 crore – as it has been regularly buying shares held by Airtel’s promoters — Singapore Telecommunications (Singtel) and the Mittal family.

As per company data, BTL’s net debt has more than doubled from Rs 15,900 crore in December 2022 to Rs 37,800 crore in December 2024. This is since over the past few years, BTL has bought stakes worth Rs 38,100 crore in India’s second-largest telecom carrier. This includes BTL’s Rs 1,900 crore initial contribution to Airtel’s October 2021 rights issue.

“As per our estimates, Airtel’s FY25E dividend payout would have to increase to at least Rs 14 per share (vs Rs 8 per share in FY24) just for BTL to service its interest payments,” Motilal Oswal said in a research note seen by ET.

This, it said, is since BTL’s annualised finance cost is significantly higher than its share of Bharti Airtel’s FY24 dividend.

Singtel holds a 49.44% stake in BTL while the Mittal family-backed Bharti Enterprises owns the majority 50.56%. In recent years, Singtel and the Mittal family have been shifting their direct holdings in Airtel to BTL, which has been funding such deals via debt. Consequently, BTL’s net debt has increased sharply due to its rising stake in Airtel.

Ambit Capital said BTL is now heavily reliant on dividend income from Airtel to service loans, for which, it needs India’s second-largest telco to “materially step up” dividends. It added that to further increase shareholding in Airtel, and buy Singtel and the Mittal family’s stakes in the telco, BTL would need to build cash reserves. “But there’s no disclosure on how much shareholding the Singtel-Mittal family (duo) want to maintain in Airtel via BTL.”

As per company data, BTL also has Rs 21,500 crore in dues coming up for repayment over September 2025 and February 2026.

“We expect the dues to be refinanced as BTL owns a 40.47% stake in Airtel. But given (BTL’s) rising debt-to-equity ratio, dividends from Airtel would have to be ramped up significantly over the next few years or there could be some risk of a stake sale by BTL,” Motilal Oswal said.

BTL’s debt-equity ratio has spiked to 5.4x as of December 2024 from 0.24x in June 2022.

Analysts added that BTL, at some point, would also need to contribute a further Rs 5,800 crore towards pending calls for Airtel’s October 2021 rights issue, which would also require higher revenue inflows in the form of dividends from Airtel.

Airtel has raised only around Rs 5,247 crore in the first tranche of its Rs 21,000 crore-rights issue proceeds more than two years ago. It has the option to tap the balance 75% via additional calls, though, it had in August 2024 deferred any additional calls in the near-term on grounds that it had enough cash then for immediate fund needs.

At present, Singtel and the Mittal family effectively own 29.49% and 22.93% respectively in Airtel through direct and indirect holdings. Their indirect holdings are routed through BTL.