Bharti Airtel to sell 5% stake to Qatar Foundation for $1.26 billion

Bharti Airtel Ltd said it will sell a 5% stake in the company to Qatar Foundation Endowment for $1.26 billion to strengthen its capital structure and fund future growth plans. The announcement sent its shares up nearly 5%.

Bharti, the world's fourth-biggest mobile phone company by customers, will issue 199.9 million new shares to Qatar Foundation Endowment at 340 rupees apiece, or a 7.3% premium to the stock's last close, it said on Friday.

Qatar Foundation Endowment is the investment vehicle for Qatar Foundation, a non-profit organisation wholly-owned by the Gulf state's royal family.

Bharti shares rose as much as 4.7% after the news before paring some gains.

Bharti, controlled by billionaire Sunil Mittal and also nearly a third owned by Southeast Asia's top phone carrier SingTel (STEL.SI) had $11.7 billion of net debt, or about 2.5 times its operating profit, as of end-March.

While senior company executives have previously said they were comfortable with a leverage ratio of less than three times, Bharti faces more than $1 billion in government fees and also will need to buy airwaves in India to feed its networks in some key cities.

The deal "should help ease the debt burden and improve investor confidence," said Karan Mittal, a telecommunications analyst at ICICI Direct in Mumbai.

The company recently raised $1.5 billion through overseas bonds. Goldman Sachs advised Qatar Foundation Endowment on the Qatar deal.