Bharti Telecom Ltd (BTL), the promoter entity of Bharti Airtel, is facing significant financial challenges due to its rising debt obligations. BTL’s net debt has more than doubled from Rs 15,900 crore in December 2022 to nearly Rs 38,000 crore in December 2024, primarily due to its increased stake in Bharti Airtel. Analysts suggest that BTL urgently needs higher dividend income from Airtel to service its loans and manage its debt burden effectively.

Bharti Telecom’s debt surge is largely attributed to its strategy of buying shares held by Airtel’s promoters, including Singapore Telecommunications (Singtel) and the Mittal family. This has been funded through debt, leading to a sharp increase in BTL’s debt-to-equity ratio, which now stands at 5.4 times as of December 2024, up from 0.24 times in June 2022. The company faces significant interest expenses, estimated at approximately Rs 3,183 crore annually, which far exceeds the modest dividend income it received from Airtel in previous years.

To meet its rising interest costs, analysts from Motilal Oswal suggest that Bharti Airtel’s dividend payout needs to increase substantially. They estimate that the dividend per share should rise to at least Rs 14 in FY25, up from Rs 8 in FY24. This increase is crucial for BTL to cover its finance costs and maintain its stake in Airtel without resorting to further debt or stake sales.

Bharti Airtel’s dividend policy is under scrutiny due to BTL’s financial situation. The company’s robust free cash flow and improving leverage sustainability in its Indian operations position it well to increase dividend payouts. HSBC Global Research forecasts a 114% increase in Bharti Airtel’s dividend per share for FY25, reaching Rs 17.1, driven by its strong financial performance and the need to support BTL’s financial obligations.

Looking ahead, Bharti Telecom faces significant challenges in managing its debt. The company needs to either increase its cash reserves through higher dividend income from Airtel or explore other financing options. Analysts warn that if Airtel does not significantly boost its dividend payouts, BTL might be forced to consider stake sales or refinancing options to manage its debt burden.

As Bharti Telecom navigates its financial challenges, the pressure on Bharti Airtel to increase its dividend payouts is mounting. The ability of Airtel to meet these demands will be crucial in determining the future financial stability of both companies.

Key Highlights:

• Bharti Telecom faces significant financial challenges due to rising debt, necessitating higher dividend income from Bharti Airtel.
• Analysts suggest that Airtel’s dividend per share should increase to at least Rs 14 in FY25 to help BTL service its loans.
• BTL’s debt has surged due to increased stake purchases in Airtel, funded through debt, leading to a high debt-to-equity ratio.
• Bharti Airtel’s robust financial performance positions it well to increase dividend payouts and support BTL’s financial obligations.