The Sunil Mittal family and Singapore Telecommunications (Singtel), promoters of India's largest telecom operator Bharti Airtel, are looking to increase their stake in the company by approximately six percent.
The promoters will buy the stake through Bharti Telecom, which currently owns 43.96 percent stake in Bharti Airtel. The move will result in Bharti Airtel becoming a subsidiary of Bharti Telecom, Business Standard reported.
The transaction would be worth around Rs 7,900 crore, taking into account the closing price of Bharti Airtel shares on Monday. The promoters' move is also expected to boost Bharti Airtel shares, which have been under pressure for the past few months.
Stock price of Bharti Airtel fell 2.6 percent to trade at Rs 320 on the Bombay Stock Exchange (BSE) on Tuesday, tracking the decline in the benchmark indices.
The promoters plan to fund the transaction through debt and equity.
While the Mittals hold 51 percent stake in Bharti Telecom, Singtel owns 40 percent. Temasek has seven percent stake in the company.
Singtel had subscribed to the rights offer of Bharti Telecom through its wholly owned subsidiaries, Pastel Limited and SingTel International Investments, according to a recent regulatory filing by the company.
The rights issue was aimed at allowing Bharti Telecom to "further acquire equity shares of Bharti Airtel," said SingTel's filing.
"SingTel has subscribed to its portion and thus, maintained its shareholding in Bharti Telecom. There is thus, no increase in its stake in Bharti Telecom. Over time, Bharti Telecom intends to use funds raised to further acquire shares in Bharti Airtel," the Bharti group spokesperson said in an e-mail to the daily.
"Promoters tend to hike stakes in companies to infuse confidence," said Romal Shetty, partner and head of the telecom practice at KPMG.