Airtel Money IPO: $700M cash-out, shares close 5% below offer

Minority investors paid $550 million for their full stake in 2021 and are taking out about $700 million by selling a tenth of the company. Buyers pay about 19 times earnings after parent contracts cut EBITDA by $45 million from July 2025. Management guides to a further margin squeeze of up to 2 points this year.

Airtel Money's early investors are selling a tenth of the company for about $700 million. They paid $550 million in 2021 for their entire stake. That repays more than their cost, and they keep the rest of their holding.

London buyers take on the contract risk. They pay about 19 times profit that depends on contracts with Airtel Africa, which owns 77.85% of Airtel Money. Airtel Africa is also the counterparty at every price review of those contracts.

What the sellers receive

The minority investors were TPG, through its Rise Fund, Mastercard, Qatar Investment Authority and Chimetech. The registration document filed with the Financial Conduct Authority names them. Together they paid $550 million for the stake. The company was then valued at about $2.65 billion including debt.

The sale covers 270 million existing shares at £1.96 each, a tenth of the company. The final offer announcement sets out the terms. At the exchange rate it implies, that is about $700 million. The announcement does not split the proceeds by seller.

The sellers receive about $700 million after paying $550 million for the whole stake. The proceeds equal 127% of their original cost. The announcement lists only existing shares, so the company itself receives nothing.

The sellers agreed not to sell more for 180 days after admission, the day the shares join the London market. That runs to about 12 April 2027. The Rise Fund and Mastercard also held put options, which are rights to sell their shares to Airtel Africa if no listing happened in time. The registration document says those options lapse once the shares are admitted.

How parent contracts affect earnings

A fifth of revenue comes from Airtel group companies. Revenue from related parties in the Airtel group was $265 million of $1,346 million in the year to March 2026. Airtel Africa supplies services that Airtel Money buys.

The registration document says the contracts were renegotiated from 1 July 2025 and now run for a fixed term ending 31 March 2031. It describes the terms as arm's length, meaning terms that unrelated parties would agree.

The contract changes have already cut earnings. Under the new terms a payment stream called retention revenue is being phased out, and it disappears by the year to March 2027. In the year to March 2026 the changes cut EBITDA, or earnings before interest, tax, depreciation and amortisation, by $45 million.

That cut reduced the margin by 210 basis points, or 2.1 percentage points. The new terms began on 1 July 2025, so that year holds only nine months of them.

The business itself is growing fast. Revenue rose from $836 million to $1,346 million over the two years to March. In the June quarter this year it reached $399 million, up from $289 million a year earlier.

The EBITDA margin fell to 48.4% from 51.6% in that quarter as the repricing took effect. Management says the margin for the year to March 2027 should moderate by up to about 2 percentage points. That second squeeze is still to come.

What buyers pay for the business

Profit to owners over the 12 months to June 2026 was $367 million. The calculation starts with the FY26 figure of $348 million for the year to March 2026, adds $104 million for the June quarter and subtracts $85 million for the same quarter a year earlier.

At the offer price, the company is worth about $7.0 billion. Dividing that by $367 million of profit gives 19 times a year's profit.

Subtract $423 million of cash and $60 million of other bank balances. That leaves an enterprise value, the price of the business net of its cash, of $6.5 billion. That is about 9 times EBITDA.

The company targets paying out at least 80% of profit, which would be $294 million. That is 4.2% of the offer value. It is a cash return to new holders whatever the share price does.

The first cut appears in the figures for the year to March 2026, the June quarter and management's guidance. The next review does not, and the registration document gives no date for it. It says only that pricing is independently reviewed every 12 to 18 months. The majority owner is the counterparty. Buyers paying 19 times profit are relying on a contract they do not control.

Trading below the offer

The shares closed at 186p on Friday, 5% under the 196p offer, according to Google Finance (AMC:LON, 5:15 pm British time). Dealings are still conditional, so the price can move sharply when trading becomes final.

At Friday's close the shares trade at about 18 times profit. That is a little below the 19 times paid at the offer price. The payout yield is about 4.4%, against 4.2% at the offer price.

Airtel Africa's stake in Airtel Money is worth about £3.9 billion at 186p. Airtel Africa itself fell 5.2% on the day to 293p.

Citi is the stabilising manager, the bank allowed to buy shares to support the price. It may over allot up to 10% of the offer shares, which means selling more stock than it owns. With the price below the offer, buying shares back is cheaper. Stabilisation can run for no more than 30 calendar days after dealings began on 9 October, which means 8 November.

Whether 18 times profit is fair depends on the next price review, a number buyers cannot see. The shares will still trade below 196p when unconditional dealings open at 8:00 a.m. on 14 October. From that point trades can no longer be reversed.