In a deal worth an estimated USD 1.3 billion, the Gulf state of Qatar has bought a five percent stake in Indian telecom firm Bharti Airtel.
Under the deal, Bharti will issue 199.9 million new shares at a 7.3 percent premium to the stock’s closing price last week. The deal has been concluded through Qatar Foundation Endowment (QFE), an investment arm of the Qatar Foundation. The body will be able to secure a seat on the board and actively participate in all matters related to company operations. Currently, the telecom is the world’s fourth-biggest mobile phone company by number of customers.
With the deal, India has moved ahead of China as the Asian destination with most mergers and acquisitions this year. According to Thomson Reuters figures, India’s inbound mergers and acquisitions now total around USD 9.8 billion this year. India is followed by China (USD 7.7 billion) and Australia (USD 6.9 billion) in merger and acquisition activity.
The deal, Qatar’s first investment in a listed Indian company, also provides Bharti Airtel with a new lease on life. The capital will strengthen the company’s balance sheet and position it strongly for future growth. For the past three years, Bharti has witnessed a continuous decline in its profitability amid growing competition in the Indian market and poor performance of its African operations. The struggling Bharti had recently raised USD 1.5 billion in overseas bonds and has an option to sell shares of Bharti Infratel, its majority-owned telecoms infrastructure unit.
The investment marks another round of overseas buying spree by Qatari investors from mainly developed countries to Asia’s third-largest economy. Recently, the QFE has aggressively pursued minority stakes in large global companies such as Royal Dutch Shell, Tiffany and Siemens, to invest the vast oil and gas wealth of Qatar. These deals were fixed through Qatar Holding, the investment arm of the state sovereign wealth fund, which now ranks among the world’s most prolific investors. Banking sources reveal that the sovereign fund may target global investments to the tune of USD 30-40 billion annually.