Business - Fitch upgrades credit rating of Bharti

NEW DELHI: Fitch on Tuesday upgraded Bhrati Airtel's long-term foreign currency rating that will help the company raise funds in the overseas market.

The agency upgraded Brati Airtel Ltd's (Bharti) Long- term foreign currency Issuer Default Rating (IDR) to 'BBB- '(BBB minus) from 'BB+'. The rating indicates that the company is capable of repaying debts.

The rating reflect the strong financials of the company which has posted healthy growth in various segments.

"The rating upgrade reflects strengthening of Bharti's consolidated financial profile over the last three financial years to March 2008 (FY08), underpinned by strong earnings growth and a sustained decline in net leverage," the agency said in a release.

It also reflects "that Bharti is well-positioned to manage evolving industry challenges whilst maintaining a sound financial profile."

However, the release said, heavy investments on network on the back of continued high growth has resulted in negative free cash flow.

"Although Fitch expects Bharti to continue to generate a moderate amount of negative FCF in FY09, leverage metrics are expected to remain comfortable for the rating, with rising operating cash flows reducing the company's reliance on debt-funding," it added.

The rating also recognises Bharti's track record of achieving consistently impressive operating results, its leading share in cellular services and good growth prospects.

Cellular services are the key driver of Bharti's consolidated profile, accounting for 63 per cent of revenue and 59 per cent of EBITDA in H109 (half-year ended September 2008).

With per-capita wireless penetration still at relatively low levels in India (27 per cent at H109), cellular customers have been growing at a frenetic pace.

Bharti reported a customer base of 77.5 million at the end of September 2008, which represents annualised growth of 50 per cent in H109, and a leading market share of 24.6 pre cent.

Notwithstanding ongoing regulatory developments and intense competition, the company is expected to remain a major beneficiary of ongoing robust mobile growth.

However, negative pressure could be exerted on the rating in the event of large debt-funded capital expenditure, acquisitions or capital management plans.