Is this a smart move?
Malaysia’s Axiata unit to rely more on debt to fund growth
- edotco could raise gross debt to 3.5% of ebidta from below 2.5% now, CEO says
KUALA LUMPUR (Nikkei Markets) — edotco Group, the telecommunication infrastructure unit of Malaysia’s Axiata Group, may rely more on debt to fund future expansion and finance acquisitions instead of raising fresh capital, its chief executive said Monday.
The most likely approach would be raising funds through syndicated loans and project financing, Suresh Sidhu told Nikkei Markets. The company could raise gross debt as a percentage of earnings before interest, tax, depreciation and amortization to 3.5 times from the current level which hovers below 2.5 times, he said.
“The plan is now to look at debt more holistically and increase our leverage closer to tower company benchmark,” Sidhu said. “Of course, we still have to work within Axiata’s debt covenant and profile.”
Axiata had initially considered an initial public offering of edotco by 2018 to unlock the value of its tower and infrastructure assets. edotco currently owns and manages more than 25,000 telecommunications towers across Malaysia, Bangladesh, Cambodia, Myanmar, Pakistan, and Sri Lanka.
edotco has been expanding its footprint through acquisitions since 2015. It recently announced purchase of 13,000 towers in Pakistan in a deal worth $940 million. On its part, edotco plans to fund the deal via $600 million debt and pump in $174 million as equity.
There is still unutilised cash from the company’s previous round of fund raising exercises, which is sufficient for small- to medium-sized acquisitions, Sidhu said. edotco has sufficient capital to tide over the next 24 months but may have to review its options if any larger acquisition comes along, he added.
The company remains open to prospects of more acquisitions and seeks to expand further, mostly in emerging and frontier Southeast Asian and South Asian countries, Sidhu said. “We’re patient, (the) deal has to be right (and) customers have to be right.”
Edotco, which was founded in 2012, has secured three new shareholders through a $700 million maiden equity private placement. Axiata remains the largest shareholder in edotco Group with a 62.4% stake following the entry of Innovation Network Corporation of Japan, Retirement Fund Inc and Malaysia’s state investment arm Khazanah Nasional. Axiata had said earlier that it wishes to retain a controlling stake in edotco Group.
Shares of Axiata ended 0.8% lower at 5.05 ringgit apiece, while the benchmark FTSE Bursa KLCI closed 0.2% down.