UPDATE 2-Qatar extends buying spree to India with $1.3 bln Bharti deal

Fri May 3, 2013 7:02am EDT

* Qatar makes first major investment in Indian listed firm

* Deal pushes India ahead of China for 2013 foreign M&A purchases

* Investment through Qatar Foundation's investment arm

* Bharti to issue 199.9 mln new shares at 340 rupees apiece

* Qatar to secure board seat in Bharti post deal - source

By Devidutta Tripathy and Mirna Sleiman

NEW DELHI/DUBAI, May 3 (Reuters) - Gulf state Qatar has bought a 5 percent stake in Indian telecoms firm Bharti Airtel Ltd for $1.26 billion, the firm said on Friday, extending an overseas buying spree from mainly developed countries to Asia's third-largest economy.

The deal is being channelled through Qatar Foundation Endowment and a source close to QFE said it would be an active investor in Bharti Airtel, securing a board seat at the world's fourth-biggest mobile phone company by customers.

"QFE is in for the long-term," the source said, speaking on condition of anonymity.

The purchase by QFE - an investment vehicle of the Qatar Foundation controlled by Sheikha Mozah, the second wife of the country's emir - pushes India ahead of China to top Asia's inbound league table for mergers and acquisitions this year.

According to Thomson Reuters data, India's inbound M&A now totals $9.83 billion so far this year, compared with China's $7.7 billion and Australia's $6.9 billion.

Qatar's first major investment in a listed Indian company provides Bharti Airtel with much-needed capital that strengthens its balance sheet and future growth.

Bharti's profit has fallen for three years in a row, hit by fierce competition in its main Indian market, and also dragged down by losses at its African operations, which it bought in 2010 from Kuwait's Zain for $9 billion.

Controlled by billionaire Sunil Mittal and also nearly a third owned by Southeast Asia's top phone carrier SingTel , Bharti had $11.7 billion of net debt, or about 2.5 times its operating profit, as of end-March. It operates in 20 Asian and African countries and has about 260 million mobile phone customers.

The investment by QFE, a recently-established arm of the Qatar Foundation, is in line with the gas rich state's strategy of picking minority stakes in large global companies such as Royal Dutch Shell, Tiffany & Co and Siemens .

Those deals were made through Qatar Holding, the investment arm of the state sovereign wealth fund, which has emerged as one of the world's most prolific investors with stakes in companies such as London miner Glencore Xstrata and Swiss banking giant Credit Suisse.

Bankers close to the sovereign fund say it has an appetite for $30-$40 billion in global investments annually.

Separately, the non profit Qatar Foundation has a main mandate of developing the state's human capital and a knowledge-based economy, although it still owns commercial-looking investments such as telecoms firm Vodafone Qatar.

DEAL DYNAMICS

As part of the deal Bharti will issue 199.9 million new shares at 340 rupees each, a 7.3 percent premium to the stock's Thursday closing price, the company said on Friday.

The telco's shares closed 0.3 percent higher on Mumbais's National Stock Exchange, having risen as much as 4.7 percent in early trade. The stock has fallen 4 percent in the last three months.

The deal "should help ease the debt burden and improve investor confidence", said Karan Mittal, a telecommunications analyst at ICICI Direct in Mumbai.

Bharti, which recently raised $1.5 billion in overseas bonds, has an option to sell shares its majority-owned telecoms infrastructure unit Bharti Infratel. Bharti Airtel did not sell any shares when this unit went public last December.

It is also looking to sell up to a quarter of its satellite television services arm, sources told Reuters in March.

Goldman Sachs advised Qatar Foundation Endowment on the Bharti deal.

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