Bharti Airtel up 3%, hits new high ahead of ex-date for rights issue

Shares of Bharti Airtel hit a new high of Rs 747.6, up 3 per cent on the BSE in Friday’s intra-day trade ahead of ex-date for rights issue on Monday, September 27, 2021. The company’s Rs 21,000-crore rights issue will remain open for subscription between October 5 and October 21.

The telecom services provider has fixed Tuesday, September 28, 2021 for the purpose of determining the shareholders who shall be eligible to receive the rights entitlement in the Issue. The company will issue 1 equity shares of Rs 5 each on rights basis for cash at premium of Rs 530 per share for every 14 equity shares held on the record date.

Airtel has fixed the rights issue price at Rs 535 per share, a discount of 26 per cent to its last close of Rs 726 per share. The rights entitlement (RE) will get credited to shareholders’ accounts by October 4. The trading in REs will take place between October 5 and October 18. The special trading window will allow shareholders, who don’t wish to subscribe in the rights issue, sell their REs through.

As far as terms of payment of the issue price are concerned, 25 per cent is to be paid on application, balance in two more additional calls as may be decided by the board or committee, based on the company’s requirements within an overall time horizon of 36 months. The promoter and promoter group of the company will collectively subscribe to the full extent of their aggregate rights entitlement along with any unsubscribed shares in the issue.

Analysts at Emkay Global Financial Services believe that management articulated its near-and long-term strategy well, with strong visibility on revenue growth across businesses, and expectations of healthy return ratios in the near term. However, it did not quantify the potential increase in capex spends to support the high growth rates. Apart from that, it addressed concerns about investments in Indus Tower, Airtel’s investment in OneWeb and debt-free balance sheet at the promoter level (Bharti Telecom), the brokerage firm said.

“We continue to believe that Bharti Airtel remains well-placed to gain the maximum from tariff hikes given the quality of subscribers and with VIL’s weakening financial position leading to a strong influx of new subscribers. Given the tariff hike expectations in H2FY22 and strong FCF generation, the underlying balance sheet is well-funded, and the current fund-raising is to enhance investments for 5G spectrum purchase, with the service launch expected in H2FY23,” it added.