Airtel acquires 9% stake in Avaada Clean for Rs 7.8 crore

Bharti Airtel has acquired around a 9 per cent stake in renewable energy firm Avaada Clean TN Project, a special purpose vehicle formed for the purpose of owning and operating captive power plants, for about Rs 7.88 crore in an all-cash deal, according to a regulatory filing.

Shares of Bharti Airtel advanced 2 percent in the early deals on March 10, after the telecom major announced the acquisition.

Bharti Airtel acquired a stake in Avaada to comply with regulatory requirements for captive power plants under the provisions of Electricity Act 2003 and Indian Electricity Rules 2005 and procurement of cost-effective renewable energy, the company said in a regulatory filing on Wednesday.

According to the filing, the country’s second largest telecom company has paid “Rs 7,88,51,500 in aggregate for the acquisition of aggregate 78,85,150 equity shares of Rs 10 each,” accounting for a 9.012 per cent stake.

At 11:00am yesterday, the stock was trading at Rs 702.05 apiece on the NSE, up 1.53 percent, while the benchmark Nifty50 climbed 371.10 points or 2.27 percent at 16,716.45. Bharti Airtel touched an intraday high of Rs 707.30 and an intraday low of Rs 695.60.

Earlier, Bharti Airtel shareholders approved the issue of preferential shares to Google for its about Rs 7,500 crore investment in the company to buy 1.28 percent stake. A special resolution to approve Google’s investment was approved by over 99 percent of the shareholders, according to the voting result of an extraordinary general meeting (EGM).

Additionally. Bharti Airtel’s recent Rs 2,500 crore investment to acquire Indus Tower stake is based on the precondition that the amount paid to Vodafone Plc shall be infused as fresh equity in VIL. Subsequently, this amount will be used by VIL to clear its outstanding dues towards Indus. Indus, in turn, should use the amount to pay annual dividends.

Assuming Rs 20 per share dividend, Bharti Airtel should receive Rs 2500 crore (including 4.7% stake). The transaction, thus, is cashflow neutral for Bharti and its existing FCF generation and deleveraging trajectory may not be disturbed, say experts.