MUMBAI: Bharti Airtel has received bids from more than a dozen overseas banks keen to fund its merger
with top South African mobile company MTN, raising hopes that the nearly $23-billion biggest cross-border M&A deal ever by an Indian company was inching towards a successful outcome.

Bharti, India’s largest mobile company by subscribers as well as revenues, had called for fresh indicative financing bids from banks, and bankers said a total 13 banks from the US, Europe and Asia had put in their indicative bids, each for an amount of $500 million, before Monday’s 10 am deadline.

The company is likely to decide on the banks by the middle of this week, and finalise the financing by August 29. A successful transaction will create a global telecom powerhouse with more than 200 million subscribers and with revenues of over $20 billion.


Investment bankers familiar with the matter said Bharti was now looking at an overseas loan component of around $3-$3.5 billion and a rupee funding of around $1.5-$2 billion. The rupee component of the financing is double initial estimates, and reflective of the strong interest among Indian banks to have a slice of the transaction.

State Bank of India and a host of other public sector banks, including Punjab National Bank, are said to be looking at funding the rupee option. A larger rupee component could help the company save on hedging costs, although the interest rate on the loan will be higher.

The overseas banks said to have put in their bids on Monday include Barclays, Bank of Tokyo-Mitsubishi, Calyon, Citi, DBS, HSBC, JP Morgan and Sumitomo Mitsui Banking Corporation. Bharti’s deal advisor Standard Chartered Bank has offered to underwrite the entire $5 billion required for the acquisition.

Many of these overseas banks had previously put in their funding bids on June 30, but were told by the company to bid afresh and for lot sizes of $500 million, as it sought to take advantage of easing global credit markets and the strong interest in the deal.

“Bharti will save at least 100 basis points (bps) due to the delay in the deal,” said one senior banker, asking not to be named. Bankers said Bharti would now be able to raise the loan between 325-350 bps above the benchmark London Inter-Bank Offered Rate (Libor), down from around 450-500 bps a few months ago. Both the foreign currency and the rupee loans will have an average maturity of four years.

Overseas borrowing rates for Indian companies have been trending down. State-owned AAA-rated company IRFC, which is regarded as a quasi-government company and is in the market to raise $500m, is said to have received bids of around 300 bps above Libor. Six-month Libor is around 0.83%.

Bharti, which attempted but failed to seal a deal with MTN last year, declined to comment. “Beyond what we have already communicated in our previous press note, we have no further comment to offer at the moment,” the company said in response to an emailed questionnaire.

The company has been tight-lipped on the progress of the deal, and the recent extension of the deadline for exclusive talks between Bharti and MTN prompted speculation about the various roadblocks in the way of its successful completion.

Earlier this month, people with knowledge of the negotiations said the two sides were looking at ways to surmount at least three major obstacles, notably a demand for sweetened deal terms by the South African firm’s shareholders.

A company executive, who asked not to be named, told last month that Bharti would dip into its cash reserves and short-term investments of Rs 6,300 crore, giving it access to up to a third of the funds to finance the deal.

The deal’s contours, unveiled in May, involve a complex structure in which both firms would pay cash and equity for stakes in each other, the end result of which will see Bharti Airtel getting a 49% stake in MTN and the South African telco and its shareholders getting a 36% economic interest in Bharti.

If successful, the transaction will be India’s biggest cross-border deal to date, surpassing Tata Steel’s acquisition of Corus for $12.2 billion in 2007. Bharti and MTN revived merger talks in May, a year after negotiations broke down over which group would control the merged entity. MTN also held talks with Bharti’s rival Reliance Communications in May 2008, but these too failed.