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Fundamentals May 31, 2013

Nik's Diary
The Indian markets opened flat to positive tracking flat in SGX Nifty while the other Asian markets are trading positive. US markets ended Thursday's trading mostly higher, partly offsetting the weakness that was seen in the previous session. The strength on Wall Street came on the heels of the release of a batch of economic data that was though weaker than expected but was not bad enough to raise serious concerns about the economic outlook. Report released by the Labor Department showed that initial jobless claims climbed to 354,000 in the week ended May 25th from the previous week's revised figure of 344,000. A separate report from commerce department said that GDP increased at an annual rate of 2.4%in the first quarter compared to the previously reported 2.5% growth. The European markets pared their gains in the afternoon impacted by the unexpected downward revision of the U.S. GDP, but largely finished in the green on Thursday. Meanwhile, Indian shares ended modestly higher reversing the early losses led by better than expected earnings from auto giants supporting the sentiment. However, the markets witnessed lackluster trading as traders rolled over positions in the futures and options segment. 

Bharti Airtel set to sell stake in landline, enterprise business to cut debt
BhartiAirtel, India's largest mobile phone company by subscriber numbers and revenues, plans to sell minority stakes in its landline and enterprise businesses as part of an exercise to cut debt, two executives with direct knowledge of the development said. The company is learnt to be looking at an enterprise valuation of about Rs 17,000 crore for its fixedline unit and about Rs 6,500 crore for its enterprise business. The Sunil Mittal-promoted telco has already sounded out potential investors, but is yet to sign non-disclosure agreements with either strategic or PE investors, one of the executives quoted above said. The exact quantum of the stake sale has not been decided yet, but it will be less than 50%, this executive added. The executive said the stake sale in the fixedline business will happen first and the enterprise unit much later, maybe after 12-18 months. The Bharti spokesperson said the company will not comment on selling stake in its fixedline business, but has no plans to offload stake in the enterprise arm. Bharti, the world's fourth-largest mobile phone company in terms of customers, will offload stakes in these two businesses only after it completes the sale of a 25% stake in its DTH arm. It is in talks with several private equity funds to sell up to 25% in its DTH venture for about $250 million. One of the executives quoted above said Bharti's recent decision to terminate its JV with Alcatel-Lucent for managing its fibre optic cable, fixedline and broadband business was on account of its plans to have 100% control of this business before selling a minority stake. One option being considered is to invite rival mobile phone firms Vodafone and Idea to create a consolidated entity.

Bharti Airtel set to sell stake in landline, enterprise business to cut debt
INDUS-LIKE ENTITY BEING PLANNED
The merged entity will combine and manage the landline and cable businesses of all three companies on the lines of Indus Towers, the world's largest tower company, and thenmonetise this entity, the executive added. Last month, Bharti Airtel BSE -0.54 % had entered into a deal to sell a 5% stake to Doha-based Qatar Foundation for Rs 6,796 crore in order to bolster finances that are weighed down by a debt of $11.7 billion (Rs 63,839 crore). Executives linked to Bharti said the company is looking to monetise some of its assets to deleverage its balance sheet as this would give it headroom to pick up more funds from the market. The telco had raised $1.5 billion (Rs 8,094 crore) through bonds in the March quarter to reduce debt. Bharti's enterprise arm, which is a B2B business vertical and provides connectivity and a range of other communication services to corporates, is its second-largest business division after mobile services, with revenues of Rs 5,320 crore in the year ended March 2013, accounting for close to 10% of the telco's total sales across India, South-East Asia and Africa. This business segment had earnings before interest depreciation and tax (EBIDTA) of Rs 936 crore last fiscal. Sales grew 19% and EBITDA 13% in the fiscal, as per information available on the Bharti website. Source: Economic Times

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