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Bharti Airtel shares gain 2% on 20% stake sale in DTH arm to Warburg Pincus

Post the deal, Airtel will own 80 percent stake in the DTH arm.
Bharti Airtel shares gained nearly 2 percent in morning Wednesday after the company decided to sell 20 percent stake in its DTH arm to US private equity firm

"...an affiliate of Warburg Pincus, a global private equity firm, will acquire up to a 20 percent equity stake in Bharti Telemedia, the direct-to-home subsidiary of Airtel, for approximately USD 350 million," the country's largest telecom operator said in its filing on Tuesday.

Under the deal, Bharti Airtel will sell 15 percent stake in Bharti Telemedia and the remaining 5 percent will be sold by another Bharti entity, it added.

Macquarie said given Airtel's superior ARPUs and margins, the deal is valued at just 2 percent premium at EV/FY17 EBITDA. Valuations reflect Airtel's strong recent performance, it added.

While maintaining an overweight call on Airtel with a target price of Rs 658 per share, Morgan Stanley said the transaction valued DTH business marginally ahead of estimates and the cash raised should enable Airtel to fund capex on the India wireless business.

As part of the deal, Viraj Sawhney, managing director of Warburg Pincus India, will join the board of Bharti Telemedia.

Post the deal, Airtel will own 80 percent stake in the DTH arm.

Bharti Telemedia, which operates under the Airtel TV brand, had approximately 14 million subscribers and a revenue of about USD 550 million during the 12-month period ended September 2017.

"The Indian digital TV market is expanding rapidly and we believe that Airtel DTH is well positioned to capitalise on incremental growth in digitisation and new TV penetration in Tier 3 and 4 towns and rural areas," Vishal Mahadevia, MD and Co-Head, Warburg Pincus India said.

At 9:16 hours IST, the stock price was quoting at Rs 532.50, up 1.63 percent on the BSE.
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